Neotel ventures into Africa

By Candice Jones for Neotel

Johannesburg, 18 Mar 2009

Neotel is making a foray into four of SA's neighbours, extending its fibre network to supply voice and data services.

Speaking at the company's Solutions Day yesterday, Richard Shearer, Neotel's international business divisional head, explained the company has begun working fibre into Namibia, Botswana, Mozambique and Lesotho.

He says the company would only provide Time Division Multiplexing services to those countries, made up of voice and data. He adds there is scope for other services at a later stage.

Rajeev Sinha, Neotel's products and solutions head, explains the foray into the African countries stemmed from an agreement with shareholder Telecom Namibia. “The project just grew from there.”

One of SA's neighbours not included on the list is Zimbabwe. The country has seen little local investment during its troubled times. However, analysts say it is the country to watch for future investment, following a power sharing deal within Zimbabwe's government.

Why not?

Namibia and Botswana are relatively small markets, explains Richard Hurst, programme manager for communications for Africa at IDC. He says it does make sense for the company to leverage the partnership with Telkom Namibia to grow outside of SA.

They are in a finite market here.
Irnest Kaplan, head, Kaplan Equity Analysts

However, he feels Neotel's key focus should be in the South African market. “You can understand that they will want a bigger footprint. Africa is seen as a safe haven during the current economic situation, but whether it will turn out that way is another story,” he notes.

Hurst says Angola and Zimbabwe will be the countries to watch in the future.

Irnest Kaplan, head of Kaplan Equity Analysts, says it would be good for Neotel to consolidate its business operations in SA, but should by no means be excluded from expanding into other African countries. “As long as it's not at the expense of the South African operation, I don't see why they shouldn't explore those opportunities.”

He notes that the growth prospects for Neotel in SA could be considered slim. “They are in a finite market here. Essentially, they can target the corporate customer and win consumers from Telkom. The fixed-line market is not growing.”

He says for the large telcos, like Telkom, and mobile operators, countries like Zambia and Mozambique could prove to be an extremely small market. “However, Neotel, with its local growth prospects, could find good value in those countries.”

Neotel expects to have services in the SADC region up and running by the middle of this year.