Altech’s largest subsidiary, Autopage Cellular, is keen to expand beyond its core business of cellphone service provision. This comes as pressure on profit margins in the industry intensifies.
Newly appointed Altech Autopage Cellular MD Boyd Chislett says the company will work closely with another Altech company, Technology Concepts — the two firms are now housed strategically in the same building in Midrand — to develop new products and services.
Chislett says he is mindful of competing head-on with the company’s partners in the mobile industry — MTN, Vodacom, Cell C and Telkom’s 8ta — but he says Autopage Cellular will develop its own converged network service offerings, including voice telephony and data centre hosting.
“We want to be a broader telco player,” Chislett tells TechCentral in his first media interview since being appointed to head up Autopage Cellular two weeks ago.
“I don’t want to focus purely on bottom-line cost reductions. We have to look at additional revenue streams,” he says.
“We have to make sure this company is more than just a cellular service provider. We need a far broader portfolio we can take to our customers.”
He says the company will offer voice-over-IP and international connectivity to its clients. It will also provide hosting services, pitting the company more directly against converged communications players such as MTN Business, Vox Telecom and Dimension Data’s Internet Solutions.
“We won’t go out there and compete overtly with the mobile operators,” Chislett says. “There are certain niches in which the networks don’t operate. Also, [the mobile network operators] accept there will be competition in certain spaces. The relationship is very mature around that.”
The challenge for independent service providers like Autopage Cellular is that they are heavily dependent on the margins the network operators choose to pass on to them. With the operators facing their own pressure on profit margins, the worry for service providers is that they’ll bear the brunt of cost-cutting measures.
But Chislett says the discussion around margins in the cellular resale channel has been going on for “eight or nine years already”.
“We would be silly not to expect pressure from the networks when our current agreements with them end,” he says. “However, massive margin reduction would not be in the industry’s benefits. It would not be appropriate.”
Nevertheless, Autopage Cellular is ensuring it manages its costs, Chislett says. “If margin reduction is put on the table, we must ensure we can still produce the shareholder returns we are currently producing.”
Though not as exposed to the least-cost routing (LCR) market as companies like Vox Telecom, Altech is keen to move its LCR clients onto its own voice network as wholesale mobile call termination rates come down.
High termination rates — the fees mobile operators charge each other to carry calls between their networks — created an arbitrage opportunity for LCR players. As the rates come down over the next few years, those opportunities are expected to dry up.
Chislett says Autopage Cellular will work to migrate its LCR customers onto Technology Concepts’ voice-over-IP (VoIP) network. It expects to launch its first VoIP products early next year.
He says Autopage Cellular is also keen to work more closely with other Altech companies, including vehicle-tracking specialist Netstar, to provide bundled products to consumers. — Duncan McLeod, TechCentral