SNO 'off to a slow start'

The second national operator (SNO) would launch the business in six to nine months of receiving its licence, Karl Socikwa, CEO of Transtel and chairman of the steering committee of SA's SNO, said in July.

However, Craig Terblanche, MarketWorks' business and technology advisor, says it is likely the SNO will require a longer time frame before it begins its operations.

"Unless some festive season leave is cancelled, the SNO will be off to a slow start," he says.

If the SNO is using a wireless approach, Terblanche says, it may not only have infrastructure issues to resolve but the frequency licensing time lag as well.

The stated SNO target market of "all customer segments, although obviously not all in one go from day one" suggests that it will have to segment its market and target those customers whose need is great or those which are more risk tolerant than others, according to Terblanche.

These customers are likely to be corporations and SMEs who are looking for the innovative bundling of landline, mobile, voice over IP and Internet services into a complete package, he says.

BMI-TechKnowledge telecoms analyst Richard Hurst agrees: "The SNO will begin by targeting corporations and the SME markets, offering a bundled voice and data solution via partners."

The competitive advantage is that the SNO may leaner and more agile in its service delivery, says Hurst.

"Price will be an issue, but any expectation of a radical overhaul must be tempered with reality and we can expect to see a drop of about 20% to 30% in wholesale prices," he says.

The SNO will likely enter into partnership with one or more of the mobile network operators, Hurst notes, as there is a distinct mutual benefit for the access and transmission portion of the two networks.

Telkom is well entrenched in the corporate world of SA, says Hurst. Thus, the SNO will find the battle for market share tough and will probably gain no more than 5% market share in the first year of operation.

Terblanche puts the figure at even less than that, predicting that the SNO would probably gain as little as 1% of fixed line market share in the first year of operation. Customers are likely to use a "belts and braces approach" until the SNO proves worth in terms of reliability, flexibility, cost effectiveness and responsiveness, he suggests.

Communications Users Association of SA (CUASA) spokesperson Ray Webber is concerned by the impact of Telkom's entrenched position in the South African corporate sector. CUASA is concerned, he says, that the SNO is entering a changed market due to the three-year delay in awarding the licence. "Also, the incumbent has strengthened its position during the delay period.

'We believe that these aspects will have weakened the SNO's position to an extent," he says. There is however a hope that the SNO will be able to establish itself quickly to compete and provide competitive and innovative products, he says.

One major competitive advantage the SNO has over Telkom is that they are not constrained by legacy infrastructures, says Terblanche.

The SNO is therefore in a position to leapfrog Telkom and use the latest and more cost effective technology across multiple platforms.

Worldwide trend, he says, has been that the incoming SNO enters the market with a wireless solution. If the SNO piggybacked off the incumbent's fixed-line infrastructure, it would already be at a significant disadvantage.

"So the SNO will have to play its own game, not Telkom's," he concludes.

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SNO licence to be issued on Friday