Former ECN Telecommunications CEO John Holdsworth will form a new company next year that he says will slash the cost of mobile telephony in SA by taking advantage of the cellular operators’ broadband wireless access networks.

Holdsworth, who founded ECN five years ago as a provider of voice-over-Internet Protocol (VoIP) services to the corporate sector, sold the company earlier this year to JSE-listed Reunert in a deal worth about R200m.

He recently stepped down as CEO of ECN and will remain as nonexecutive chairman of the company and as a consultant to Reunert until June next year, when his employment contract and restraints of trade expire.

He says the new company, which will only be launched after June and which hasn’t yet been named, will take advantage of “arbitrage” opportunities that are starting to flow from recent sharp reductions in mobile broadband prices. With operators starting to deploy next-generation broadband networks based on a technology called long-term evolution, or LTE, millions of South Africans will have access to 10Mbit/s and faster connections from their cellphones, speeds Holdsworth says will make mobile VoIP and related services a compelling proposition for consumers.

In the way that Telkom lost voice minutes to cellular rivals and to VoIP services, the “same thing is going to happen in the mobile space”.

He believes a significant change is coming in the telecoms industry as VoIP providers start eating into the voice minutes generated by the mobile operators.

“Today, across a retail broadband link, I can run voice for between 5c and 10c a minute and do so highly profitably,” Holdsworth says. “It’s not sustainable for the mobile operators to be charging R2,50/minute.”

Holdsworth, who was a key industry lobbyist for lower mobile termination rates — the fees the cellphone operators charge each other and other industry players to carry calls onto their networks — describes the new business as “SA’s fifth mobile operator”.

“It’s a virtual operator that will provide voice and data arbitrage services across networks,” he says. “From a regulatory perspective, there’s almost no doubt that in 10 years from now you will effectively see a wholesale company that owns the networks and a lot of players competing in this retail space.”

He believes the “vertically integrated model”, where operators own both the network and provide services to retail consumers, is “dying”. “In future, you’ll have two or three big network companies forced to provide cost-based pricing to a vibrant and competitive retail sector. I want to play in that space.”

Holdsworth says the new company will develop VoIP apps for smartphones and will provide on-network calls free of charge as well as cheap domestic and international calls. “Everything we do will be driven through the Web. It will be a virtual, IP-based mobile network … providing a range of services all delivered out of the cloud.”

With termination rates continuing to fall, the new company will be in a strong position to offer low-cost calls to the mobile networks, too, Holdsworth says. — Duncan McLeod, TechCentral