Not quite a price war

Wire­less providers shape up

Finweek English Edition - - Communication & technology - BENE­DICT KELLY

AN­NOUNCE­MENTS over the past month have set the cat among the wire­less broad­band pi­geons, with MTN, Sen­tech and iBurst all cut­ting prices or im­prov­ing ser­vices.

While most an­nounce­ments were some time in the plan­ning, the con­flu­ence of the events has cre­ated a newly in­vig­o­rated mar­ket in which the com­pa­nies in this field are able to take on the might of Telkom’s ADSL of­fer­ing on a stronger foot­ing.

While MTN was the first to move – dou­bling the band­width pro­vided to its sub­scribers on a short-term ba­sis – it’s the war­ring be­tween smaller play­ers iBurst and Sen­tech that makes for the most in­ter­est­ing bat­tle.

iBurst MD Alan Knott-Craig says the changes to the com­pany’s ser­vice that saw it give sub­scribers be­tween 200MB and 500MB of ex­tra through­put each month, have been planned for some time.

“Th­ese im­prove­ments are part of a strat­egy to drive down the cost of In­ter­net ac­cess, al­low­ing us to tar­get new ar­eas of the mar­ket,” he says.

“We’re adding be­tween two and three thou­sand new sub­scribers each month, and as we roll out new cov­er­age ar­eas, this num­ber should in­crease,” he says.

While iBurst has been suc­cess­ful over the past few years, Sen­tech, with its My­Wire­less ser­vice, has been lan­guish­ing. The com­pany does not dis­close sub­scriber num­bers but es­ti­mates put them at be­tween 2 500 and 4 000, well down from the peak of more than 8 000.

Mar­cel Steyn, My­Wire­less prod­uct man­ager at Sen­tech, says the com­pany had some soul search­ing to do to find a way to again make the prod­uct of­fer­ing com­pet­i­tive.

“Of the three ar­eas we could have been com­pet­i­tive in – speed, cov­er­age and price – we’re not in a po­si­tion to ex­pand our cov­er­age and we can’t dif­fer­en­ti­ate our­selves in terms of the speed of the ser­vice, but we can make our prod­uct of­fer­ing more com­pet­i­tive in terms of price,” he says.

With of­fer­ings that start at R99, the State-owned or­gan­i­sa­tion is of­fer­ing the most keenly priced broad­band in the mar­ket and is po­si­tion­ing it­self to take a slice of those In­ter­net users who have been stick­ing to their dial-up con­nec­tions.

Ru­dolph Muller, founder of MyADSL, says that while the new strat­egy is likely to in­crease num­bers, cov­er­age re­mains the Achilles heel.

“I think the new of­fer­ings will have a pos­i­tive ef­fect on sub­scriber num­bers, but with­out be­ing able to ex­tend their cov­er­age, it will con­tinue to be the small­est provider. It needs funds to grow its net­work and mar­ket its prod­ucts, and with Gov­ern­ment drag­ging its feet, Sen­tech is re­ally be­tween a rock and a hard place.”

Steyn be­lieves that even with the hand­i­cap of not be­ing able to in­crease cov­er­age, there’s a suf­fi­ciently large un­tapped mar­ket within ex­ist­ing cov­er­age ar­eas to of­fer the com­pany growth op­por­tu­ni­ties.

How­ever, Arthur Gold­stuck, MD of

Sen­tech is re­ally be­tween a rock and a

hard place.

World Wide Worx, says wire­less broad­band sup­pli­ers have a way to go be­fore they can make in­roads into the un­con­nected mar­ket.

“Once wire­less broad­band brings down the to­tal cost of broad­band con­nec­tiv­ity to some­thing ap­proach­ing the to­tal cost of dial-up (sub­scrip­tion plus per-minute phone charges), it will be­come an al­ter­na­tive to ADSL for those up­grad­ing from dial-up. Sen­tech’s R99-a-month of­fer­ing is well po­si­tioned to do just that. How­ever, it’s not a vi­able so­lu­tion to bring on board those not yet con­nected. Dial-up is too ex­pen­sive for that mar­ket, so wire­less broad­band, at cur- rent prices, is cer­tainly not go­ing to have an ef­fect there.”

The prob­lem is that the mar­ket for ba­sic In­ter­net ac­cess isn’t grow­ing as fast as the broad­band mar­ket.

“Growth of over­all con­nec­tiv­ity is com­pletely stag­nant – we’ve seen 10% growth in the In­ter­net user base in the last three years. The only real growth we have seen is the ex­tent to which users have up­graded from dial-up to ADSL, or adopted wire­less broad­band along­side other con­nec­tiv­ity op­tions,” he says.

With the wire­less op­er­a­tors mov­ing to ag­gres­sively tar­get the mar­ket, South African con­sumers may not be get­ting the price war they were hop­ing for, but with Sen­tech at least mak­ing an ef­fort to com­pete ef­fec­tively, the op­por­tu­nity is there for users to com­pare the deals that are out there and pick the one that suits them.

Putting the plan into

ac­tion. Alan Knott-

Craig (jr)

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