[By Candice Jones]

South Africans once regarded Neotel as having the real potential to offer a competitive alternative to Telkom in residential services. But as the company releases an uninspired prepaid retail offering this month, that dream already appears to have faded.

To remain relevant in SA’s new telecommunications landscape, operators have to step up their game and release products with a strong competitive edge.

Neotel’s overly cautious approach to the market — its prepaid offerings come at least six months after they were first expected — will not give it the boost it needs to make good on its consumer mandate.

It has not been an easy road for the company, once known as SA’s second national operator. It was licensed four years ago and had barely got its first products to market when hundreds of new operators were licensed, thanks to a high court case won by JSE-listed Altech against former communications minister, the late Ivy Matsepe-Casaburri.

Altech’s court victory could be one of the reasons Neotel has been slow to connect to the consumer market.

The company hasn’t been completely quiet. It has built a network using CDMA2000, a rival technology to the GSM networks used by the mobile operators, and a technology that is meant to be well suited to providing fixed-wireless connectivity.

But after four years, its consumer basket is looking a little bare. It has fewer than 50 000 retail customers. (Apparently it’s doing better in the corporate and wholesale markets.)

Neotel has said previously that its offering isn’t meant as a direct challenger to Telkom’s products. It says its network is smaller than Telkom’s and that it is still rolling out the fibre it needs to provide high-speed broadband to consumers.

Though this is true, one wonders if the company has also been hobbled by its own conservatism. Its prepaid offering hardly inspires confidence that the company has what it takes to compete effectively in the retail consumer market.

Prepaid services have proved to be one of SA’s finest telecoms business models. It’s a model that has put telephones in the hands of millions of people, including the poor, for the first time.

The first problem with the Neotel’s product is that it’s only available in denominations of R100. Smaller-denomination vouchers from the cellphone providers have done exceptionally well as many consumers only have a few rand at the end of the week or month to throw at communications.

The calling rates offered by Neotel are not particularly competitive either. On-net calls and calls to Telkom are charged at 50c/minute and calls to mobile operators at R1,50/minute in peak times and R1,20/minute off-peak.

For the time being, you can also only buy a single handset — a bulky device at a once-off cost of R599. Though data speeds on the device are slow (not much better than traditional dial-up), it is probably sufficient for the average consumer to use e-mail and basic Internet features. Neotel says it will have faster data modems on sale soon.

One wonders, though, how much time and effort the company really put into planning its prepaid offering.

It would probably have had more of an impact if it had been released three years ago. Now it looks like too little, too late.

Yes, its prepaid offerings are a work in progress, but if Neotel really is serious about the consumer market, it must take a good look at its strategy.