Neotel Ends Monopoly of South Africa's Fixed Line Market

Posted 05 September 2006 @ 09:05 am EET     Print     Reprint     E-Mail     Comments

JOHANNESBURG (AP) - Telkom's monopoly of the South African fixed line phone market has come to an end with the launch of a new national operator as part of a long-awaited liberalisation programme.

Neotel was officially launched at a news conference on the outskirts of Johannesburg by the company's managing director Ajay Pandey, who promised to "change the telecoms landscape in South Africa" by introducing competition.

"We believe that our entry into the South African market will open up new opportunities for business and create new opportunities for South Africans on the global stage," Pandey said Thursday. Neotel planned to be up and running for business clients by December, initially concentrating on Johannesburg, Pretoria, Cape Town and Durban. South Africa in late 2001 started a process to licence a second public fixed-line operator to bring to an end to the stranglehold by Telkom on the sector, the country's only fixed phone-line provider and Africa's largest phone company.Neotel, previously known as SNO, was granted a 100-million-rand (14-million-dollar) licence last December.

Run as a government department until 1991 when it became a commercial company, Telkom has been the only installer of fixed lines in homes and at work, sometimes much to the ire of consumer groups.Charley Lewis, a telecommunications technology specialist at Johannesburg's Wits University, said the introduction of competition was long overdue but warned that the impact would not be felt immediately.

"It's a major step forward but it's just a great pity that it's much, much later than it should have happened in the first place," he told AFP."I don't think it's a dramatic step. I think it's an important step, in terms of additional choice, in terms of the push that it is going to give the market for companies to innovate, in terms of range, quality and pricing of servces. But I think the impact is going to be a slow impact."

Andrew Kingston, a Cape Town-based equity analyst at Sanlam Investment Management, also warned that the impact would not be felt immediately."It will be a gradual process, it will take time to gather momentum. Initially, it's not expected to have much impact," he said.

As part of its licencing obligations, Neotel must broaden the network of some five million telephone lines already in existence among South Africa's population of 46 million, and provide Internet connections to 2,500 schools and 2,500 rural clinics.Pandey said Neotel was planning a massive programme in investment in the years ahead."We anticipate a cumulative capital expenditure of more than 11 billion rand in the first ten years of our operation," he said at the launch.Lewis said that Neotel was likely to focus mainly on attracting business users rather than private customers

"I would imagine that they would probably mainly go to the corporates, it's a kind of high revenue costumers that they are after," he said."I am sure Telkom would be concerned about the entry of the SNO but it has had many years to prepare for it. And I am sure they will continue to dominate the fixed line market for many years to come."Kingston said there was no doubt that Telkom would have to raise its game with the advent of competition."It's a move in the right direction. It's good news for everyone. It will force Telkom to be more competitive," he said.