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Vumatel fires warning shot with prepaid fibre services

Read time 4min 40sec
Vumatel CEO Dietlof Mare.
Vumatel CEO Dietlof Mare.

Fibre network operator Vumatel has launched a prepaid platform for its fibre-to-the-home (FTTH) services, as it seeks the disruption it caused in the telecoms sector five years ago, when it entered the market.

In 2014, Vumatel unsettled the telecoms space when it pioneered FTTH in South Africa, and has since connected thousands of homes across Johannesburg, Cape Town and Durban to broadband Internet.

As margins continue to erode, with consolidation looking likely, the fibre “land grab” intensifying and customer loyalty diminishing, the telecommunications industry is evolving and new products are a must.

Vumatel believes it has the right product to again interfere with the market.

Having kept its new offering a closely guarded secret, Vumatel announced today it has launched “the world’s first” prepaid platform for fibre-to-the-home services.

To date, Vumatel says more than 1 000 homes have activated its fibre, leveraging the prepaid platform, with another 40 000 expected to be added in the next four months.

CEO Dietlof Mare says: “We believe that an innovative approach, and willingness to look beyond a postpaid model, was a critical consideration in shaping our emerging market strategy and this platform is a game-changer, for opening accessibility to emerging market communities.

“We believe this platform and the flexibility of a prepaid model has been one of the key successes of our pilot with the Mitchells Plain community. And it is a model we will definitely rollout as we embark on our emerging market strategy.”

The company, which has a footprint in excess of 600 000 homes, anticipates there are at least a further 700 000 homes in emerging markets that it can reach, and that the prepaid platform is a key enabler of this rollout.

According to Vumatel, the prepaid platform gives customers uncapped, unlimited Internet access for a 28-day period, that can either top-up automatically, or by purchasing additional access as and when finances allow.

Risky innovation

Brian Neilson, director of BMIT, says: “This sounds very innovative, and could be disruptive, or at least an enabler, of higher uptake of the fibre service in this segment of the market. The number of activations to date that Vumatel says it has achieved sounds like a success story in itself.

“While that would be disruptive for subscriber numbers, it is harder to project a return on the fibre capex when the customer is able to switch the service on and off at will. In my opinion, that makes the move by Vumatel even more innovative by taking the risk.

“When innovative prepaid services were first introduced in the mobile market, they proved to be an enormous uptake enabler and success story.”

However, Neilson cautions: “This is a different segment and carries its own price ranges, not to be confused with the type of uncapped services that today’s fibre contracts carry. It does mean a new segment has been opened up, however.”

On the contrary, director of pricing research at Africa Analysis, Ofentse Dazela, believes Vumatel’s prepaid services are “neither a new concept nor a ground-breaking innovation in the South African telecoms landscape, as the prepaid model has long been embraced by local players, both in the mobile and fixed-line space”.

“Internet service providers such as Afrihost, Axxess and GamCo are notable service providers that have been offering prepaid connectivity in the DSL space, by making prepaid vouchers available to customers through outlets such as Engen and Pick n Pay,” he says.

According to Dazela, in the case of DSL service, “there was actually no need for customers to buy prepaid packages as the addressable market was quite happy to settle their account on a monthly basis, hence month-to-month, 12-month and 24-month contract plans remain popular to date”.

Dazela, however, says: “Considering that fibre network operators are now aiming to unlock new revenue opportunities in townships and the so-called secondary cities and small towns, operators need to review old payment methods and introduce new payment models that will not be burdensome to the low LSM market.”

Additionally, he feels the latest Vumatel offering can be a catalyst in the fibre sector.

“I believe this is the right approach and we will see lower-priced FTTH packages unveiled in these less affluent communities. It cannot be deemed a disruption of some sort per se, but rather a case of operators trying to create solutions that will assist the wider rollout of fibre services in previously disadvantaged communities.”

Serious rivalry

The latest Vumatel offering comes at a time when there is fierce competition in the fibre market.

Most companies have now set their sights on the township and smaller markets popularly referred to in the sector as the secondary markets.

In May, Telkom went live with its fibre connectivity at Orlando West High School in Soweto, giving learners Internet access.

Octotel joined in, becoming the first independent open-access fibre network operator to reach 110 000 homes in Cape Town.

In August, Vumatel announced it will rollout broadband connectivity to 900 000 households in Ekurhuleni and 450 000 in Soweto.

Frogfoot has followed the N4 through Witbank and Middelburg and onwards.

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