AppChat, the mobile voice specialist founded recently by former ECN Telecommunications CEO John Holdsworth, will launch a mobile virtual network operator (MVNO) later this year, TechCentral has learnt exclusively.

The company is promising, in the process, to slash the cost of mobile calls in SA.

Holdsworth isn’t saying yet which network operator AppChat is partnering with to launch the MVNO, but says this will be disclosed in about a month from now.

AppChat will be SA’s second MVNO after Virgin Mobile, which piggybacks on Cell C’s network. Virgin Mobile has only managed to grab a tiny slice of SA’s mobile market, but Holdsworth says AppChat’s approach will shake up the MVNO model — and the telecommunications market — by slashing the cost of mobile telephony by up to 50% and offering high-quality voice products. The company plans to begin selling services to consumers in October.

AppChat will build what Holdsworth calls a “hybrid” voice offering, where calls are routed over its network partner’s 3G network in areas where there is sufficient bandwidth available. Calls will be routed over traditional mobile GSM networks outside 3G coverage areas. Calls over 3G will use a high-definition voice codec (for technical readers, AppChat will use the G.722.1 Annex C codec).

The company is developing an application for smartphones that manages calls and allows subscribers to control their accounts and services and see their call records and billing information in real time.

The software will be available on devices running Apple’s iOS, Google’s Android, Research in Motion’s BlackBerry OS and Microsoft’s Windows Phone 7. A version for Symbian is not planned.

Holdsworth says he is modelling AppChat on a company called Telmore, which is the largest MVNO in Denmark. At the end of 2010, Telmore had more than 700 000 subscribers and 10,4% of the Danish mobile market.

He says the barriers to launching successful MVNOs in SA have been lowered significantly, in large part to the reduction in termination rates — the fees the mobile operators charge each other and other players to carry calls onto their networks. Holdsworth was a champion of reducing the rates, which will fall to 40c/minute in March 2013, from R1,25/minute three years ago.

“MVNOs can now compete on price,” says Holdsworth. “They can make their off-net minutes cheaper than the incumbents’ on-net minutes.”

The fact that mobile operators are moving from circuit-switched to packet-based networks using the Internet protocol is also a fact playing in favour of AppChat, he says. “We are already seeing carriers like Orange in Europe using data networks to carry voice. It’s just a matter of time before that happens in SA.”

In addition, plans by the Independent Communications Authority of SA to introduce wholesale and open-access mobile networks in SA will help shake up the market, Holdsworth says. Together, these developments “will result in the biggest change in SA’s mobile market in 15 years and it will happen over the next two or three years. AppChat is positioning itself to take advantage of that.”

He says many MVNO players have failed to run “lean-and-mean” operations and for that reason have not been particularly successful. “The really successful MVNOs worldwide have operated along the no-frills model. Telmore completely reconfigured the mobile market in Denmark with a low-cost and no-frills operation.”

Unlike traditional MVNOs, however, AppChat will install its own core network switches and will negotiate its own interconnection agreements with the network operators. “This will allow us to have more control and manage our costs better,” Holdsworth says. The company is implementing a core IP network with points of presence in Johannesburg, Durban and Cape Town.

Other than cheaper calls and the promise of high-quality voice, AppChat will entice customers to use the service by not locking them into long-term contracts.

Though it will offer discounted and free smartphones, consumers will be free to switch to other providers at any time. “There will be no contract lock-in for the airtime portion of the contract,” Holdsworth says.

The company will also offer prepaid options.

Holdsworth is promising simple package structures that are easy to understand. AppChat will offer a single per-second all-day rate for off-net calls and will not provide the separate in-bundle and out-of-bundle rates favoured by the big network operators.

The cost of data for calls that are routed over 3G rather than GSM will be included in the call tariff, meaning consumers won’t have to buy separate data bundles for their voice needs.

AppChat will offer its own branded Sim cards through traditional retail channels and also directly using couriers. “We will try to serve people through electronic channels where possible.” — Duncan McLeod, TechCentral