8ta struggling in a competitive market

SA’s fourth mobile operator, Telkom’s 8ta, looked set to shake up the SA mobile industry at launch but now appears to have dropped the ball. By Craig Wilson.

Telkom’s mobile arm, 8ta, hit the ground running in the months after its launch in 2010, offering compelling products and spending a small fortune plastering its brand across billboards and newspapers.

But industry insiders say the mobile operator hasn’t managed to capitalise on its early momentum. Perhaps it’s the impediment of a bureaucratic parent company or perhaps the operator needs to look more closely at its position in the market and shape its products accordingly.

In Telkom’s interim results for the six months to September 2011 — the most recently published numbers — 8ta recorded a little over 1,1m active mobile subscribers (a further 1,1m were counted as non-active subscribers).

It’s blended average revenue per user — with post-paid and prepaid users combined — was a paltry R63,32, well below rivals MTN and Vodacom. Of its active user base at the time, the vast majority were prepaid, but this is arguably not the segment 8ta should be targeting as its greater strength is in the business market and specifically in fixed-mobile converged services.

The head of a large independent player in the cellular industry, who asks not to be named because he works closely with 8ta, says his company has seen almost “no uptake whatsoever” of the operator’s products. He says he thinks the company is “refocusing” with the intention of making an aggressive comeback later this year but adds that 8ta has “gone very quiet”.

He says the prepaid consumer segment is extremely savvy and understands how special offers work. He adds that they are price sensitive and that attracting the prepaid market takes compelling offerings that are frequently updated to keep abreast of competitors’ offerings.

Aside from being fickle, at least compared to postpaid users, prepaid consumers often offer only slim margins. He suggests that 8ta would be better served by trying to attract post-paid clients by leveraging its ability to offer converged fixed and mobile services via its parent, Telkom.

“[8ta has] things other operators don’t. By bundling fixed and mobile together, it can make everyone watch them closely. It’s not all doom and gloom. It just has to get things right and target post-paid users with the right offerings.”

Another senior executive in the cellular industry, who also declines to be named because of his relationship with both Telkom and 8ta, says his company has seen similarly “disappointing uptake” of 8ta products and says it appears to have been plagued by “start-up issues” and problems with streamlining its systems.

“There are also cultural issues with the old Telkom mindset that need to be overcome,” he says. “We’ve got an issue where [8ta has] called a freeze period over the first two weeks of May, so there are no special offers for customers for those two weeks, which is crazy in this kind of retail world.”

He suggests 8ta is a “young and hip cellular organisation struggling against [Telkom’s] mentality”.

“Long term, I think 8ta’s plans are sound and its product offering is okay, but it hasn’t done enough in terms of the fixed-mobile convergence type of offering. For a home phone user, an 8ta cell service still means two separate bills. The strongest value proposition is to be able to get both services from one operator, with a single bill.”

The industry source says 8ta’s pricing is very aggressive but this isn’t necessarily sufficient to win against “two strong incumbents with strong brands and incredibly deep pockets”.

Though 8ta might be the cheapest on data and voice, he says it is nevertheless struggling to convert that into new business at the rates it would like to.

“The company needs to be more agile and responsive. If you’re coming in as a new player, you need to be seen as an innovator or a leader. We’re certainly not seeing that. We saw some movement last year with product offerings like the 10GB post-paid deal and BlackBerry offerings, but since then we haven’t seen 8ta setting the world alight.”

In terms of chasing the prepaid market, the source says that “if you want to go after a younger segment – which is where the brand is positioned – then you have to be constantly changing or innovating”.

Telkom is in a closed period until 8 June, when it will release its 2012 financial results, and declines to offer comment on 8ta’s performance this year.  — (c) 2012 NewsCentral Media

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