Mobile newcomer 8ta aims to capture between 12% and 15% of the local market within five years - almost eight million subscribers according to current market figures.
While analysts are divided about whether Telkom's newly-unveiled mobile unit will be able to achieve this, they agree that - at the very least - the target is extremely ambitious.
According to IE Market Research's 2010 SA Mobile Operator Forecast, the current number of mobile subscribers in the country is 51 million.
Based on this figure, 8ta's target of 15% market share means the company aims to secure 7.65 million subscribers by 2015.
At the end of June, MTN reported 17.1 million subscribers, while Vodacom reported 23.2 million - giving it the lion's share of the market, at 53.2%.
Both mobile operators have been in the market for close on 20 years, while third operator Cell C, closing in on 10 years in the market, has only recently achieved between 13% and 15% of market share.
Nonetheless, 8ta - into which Telkom will pump R6 billion over the next five years - is confident its ambitious targets are achievable and has hit the ground running, with competitive voice and data offerings, as well as a high-end device line-up.
However, an “innovative and unique” business model and offering may not be enough to allow the operator to steal significant market share from the established players. Virgin Mobile, which entered the South African market in 2006, offering month-to-month contracts to subscribers and “liberating” consumers from long contract lock-ins, has seen limited success, holding about 0.5% of the market - 250 000 subscribers - after four years.
Telkom boost
Market analysts argue that, considering the saturation point of SA's mobile industry, 8ta's targets are far too ambitious. However, 8ta is in a position to leverage off Telkom's infrastructure and resources, which should bode well for the operator's future.
She comments that, if one considers that SA's third mobile operator, Cell C, took nearly 10 years to achieve a market share of between 13% and 15% then the targets are not achievable.
In addition, Chireka continues, 8ta can expect the mobile incumbents to fiercely protect their market share. She says the mindset of operators will change from growing market share to defending market share.
“It will be a serious challenge for 8ta to take away subscribers in an already mature market,” she argues. Chireka notes that unless something drastic happens to one of the other mobile players, she does not believe 8ta is likely to achieve its target.
WWW Strategy MD Steven Ambrose agrees that the target is ambitious, but believes Telkom can achieve it.
“The target of 12% to 15% is ambitious, but not completely unreachable, and will take a huge effort on behalf of Telkom to achieve.
“Consistent marketing and exceptional service delivery, along with innovative services, will be essential for 8ta to get even close to these targets,” he maintains.
Achievable?
“Normally, this would be a completely unrealistic goal, but Telkom has got a lot of resources. Telkom is not a Cell C. We mustn't underestimate them,” says BMI-TechKnowledge MD Denis Smit.
He concedes that, under normal circumstances, he would not be of this view; however, he argues this is Telkom and the industry can't underestimate it.
“The entrance of 8ta will galvanise the industry. Telkom is a significant player in the telecommunications market in SA, and the competition would be remiss to ignore the challenge that Telkom has issued,” offers Ambrose.
He suggests that 8ta focus on the contract market to gain market share. “The key to market share will be the value proposition in the contract market, as well as innovation in both services and value in the prepaid market. The one for three call minute offer is a good start for the launch period, but will need to be followed up with greater value for the long-term,” notes Ambrose.
8ta could also focus on the underserved rural market, suggest Chireka. She adds that trends around multiple SIM card options will deliver market share to 8ta.
Ambrose concurs: “The churn in the prepaid market is relatively high and it is possible that 8ta can take some market share from the current incumbents.”
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