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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  • BritinSA

    As I tell my friend (who is on MTN) – why are you not porting to 8ta?  I ported from Vodacom and you can always go back if you don’t like it.

    - 8ta voice subscribers use the MTN network (so coverage is not an issue)

    - 1Mb of ad-hoc data is rR1 compared to VC/MTN R2, i.e. 50% less

    - They have better data bundle prices (if you are in an 8ta coverage area – not MTN)

    - You can call a landline for R0.65 from your 8ta number

    = You get 1m free airtime for every 3m incoming calls

    If you don’t know all of these benefits, then you don’t know 8ta. 

    If 8ta hopes to lure new customers, it needs to do a better job of advertising its USP’s

    PS Every-time MTN obscures my football, I ridicule my mate for staying with them

  • Koos

    Craig… good effort but you are missing the point here. 8ta is a company that should never have been.  Some points to ponder: 

    1. Any Mobile Industry expert will tell you that a 3rd entrant into a market has a low chance of success – case in point Cell C. 8ta is not even the 3rd entrant, neither the 4th, Virgin Mobile is, there are 5th !!! – chances of succes are still to say the least. 

    2. MTN & VC caught on the fact that customer service is key and have responded accordingly. 8ta does not even have a retail foot print and there customer service is done by the same people who have been managing the decline of fixed lines in this country – do yourself a favor and try and phone them. 

    3. One strategy might have been to push bundling in a triple or quad play offering, seems this approach failed miserable. The reason – wait for the, the back end Telkom SA systems do not allow it and the Telkom/8ta management believed 8ta should stay separate from the rest of Telkom – why???

    4. One also have to ask the question, why they sold VC, they had a perfectly well positioned, profitable Mobile arm but choose to sell it and start from scratch. The logic here baffles me. 

    5. 8ta, terrible Brand while I am at it, came to the market with no vision only with price plans, trying to compete with well entrenched incumbents, any MBA graduate fresh out of GIBS or any other MBA fly by night will tell you that is a recipe for disaster. 

    6. Also, one is not sure what segments they are targeting, if it is prepaid, why choose the most highly contested segment as your launch strategy, makes no sense. 

    7. Devices, those gifts from the Chinese vendors, Huawei Ideos and others, well the work well in Kenya but not here. This is a company that clearly have no device strategy. 

    8. Oh yes, the roaming agreement with MTN. Those guys at MTN are paying themselves big bonuses and patting themselves on the back for the R20Mil/month deal with 8ta. The 8ta traffic on the MTN network is but a flicker and MTN is raking in the money. Bad, bad judgment by Telkom / 8ta. 

    9. This is not the first time that Telkom started a venture, sunk Millions into it and closed it down – the ghost of Telkom Media. 

    In closing, the Telkom Management deserved to be shot for this, with slow bullets, probably supplied free of charge on a bonded contract by one of their Chinese vendors, their partners in crime.

  • http://www.clickclickboom.co.za Alan Benington

    I have 3G connections from 8ta, MTN and CellC. MTN’s connection is pathetic but reliable. 8ta’s is excellent but unreliable. CellC’s is good when there’s coverage.

    But getting the 8ta connection was like having teeth pulled. I couldn’t simply add an 8ta product to my existing telkom business account, nor could I upgrade my WCMDA phone line on my personal account. So what should have been a 5 min phone call (ok, 30 min) was a full 2 hour trip to a “service centre”.

    The problem is all the in the execution of the business, not in the technology.

  • http://bit.ly/bblplus Prom

     @135b62c142670bade292c86c8832cef9:disqus : A lot of those are valid points but you’re ignoring a couple of things.

    1. I don’t know if you’re suggesting that there should be only 2 but that is a BAD idea. Most markets have at least 5 and a number of MVNO’s. VM is actually a MVNO and they are not a very strong market force. The problem is comparisons are being made on a South African level when the 2 main players are where they are because they had the playing field almost all to themselves. Realistically 8ta is doing better than most overseas mobile networks could hope for.

    2. I know 8ta has had some problems with service but try and get any better from the 2 incumbents. Service isn’t something that will factor into consumer decisions until somebody finally starts offering it.

    4. They sold their VC shares as they were practically a dead weight keeping them from competing head on and getting the profit directly. A sound business decision and the right one.

    6. Prepaid is actually a lucrative segment where there’s much room for price improvement and with the right price/service combinations can attract a lot of customers. I have a feeling they just aren’t targeting it correctly. I also hope they don’t end the specials like Cell C did just when the numbers make it feasible. Many people are locked into contracts unfortunately and this is something that regulatory action should actually rectify.

    8. One of the reasons their specials do not use the MTN network. The roaming agreement unfortunately is a necessity for any new network. They will shed it at some point.

    9. If memory serves correct Telkom Media required IPTV. Something which isn’t happening due to Telkom. Not really a comparison to something that never got off the ground because they saw it was a bad idea.

    I hope they succeed even if only for the extra competition as we really need it and at least one more operator.

  • MobileWASP

    Unless 8ta take their customers seriously and provide service like a professional company they cannot take on the Mobile incumbents with any impact! I have been trying to get 8ta resolve a petty coverage issue since 5 Feb 2012 – Alas…3 months later, 2 “technician”visits, over 60 mins of calls to their incompetent call centre to hear the same old story: “we will call you back”that never happens.

    Any to “cap”(excuse the pun) it all, I was told if you are not happy with the (non-existent) service, you are welcome to cancel your contract. How’s that for arrogance from a player trying to get market share, and manage churn? This attitude for a post paid customer is a shocking attitude!!!

      

  • rhp

    From an ex client:

    Improvement in backoffice service level is also importnt. There appears to be absolutely no dispute resolution escalation in place!

  • http://bit.ly/bblplus Prom

    Koos, there are a number of countries with 4 or more networks. http://en.wikipedia.org/wiki/List_of_mobile_network_operators_of_Europe
    Counting the MVNO’s some of them have more than 20. So I’m not sure where you get the less than 10% success from. Maybe it’s the other way around?

    8ta isn’t even the 5th but the 4th network in fact. It’s not about how much the market can handle but how much the resources can. In a closed market like here 4 would be ideal spectrum wise but with the poor competition 5 is a must.

    The problem here is this South African mindset of a high ROI and low expenditure when the international norm is a low ROI and high expenditure. You say R3bn? Well that is a laughable amount to expect any profit on. Cell C invested more than 10 times as much and it took nearly 5 times as long as 8ta’s say 18 months before showing any net profit.

    The Vodacom shares agreement was hampering Telkom as it prevented them from competing in the mobile sphere. Not only would it have been illegal to launch 8ta but they were being bogged down in areas of high cable theft where they didn’t have a mobile solution at the time. It’s just not comparable to Naspers and Multichoice.

    Sure Telkom has a poor track record in other countries showing that companies should stick to their South African customer base. Hey they are not my first choice either when it comes to customer service and competition, but if any company can see it though it’s them and I doubt they didn’t pay some of the best accountants to work out the business case.

    My only concern is that they revert back to their uncompetitive behaviour when they think these deals are not doing the job quickly enough. It’s quite a surprise however to see Telkom having the best deal and people not jumping on it. 1.5 million customers in just a year and a half is still impressive though.

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