A mechanical engineer by learning, a sometime writer by choice and managing director of a company by way of professional responsibility, Ajay Pandey is a leader of varied parts. Among the most compelling in his portfolio of interests isthe task of taking Neotel, one of the top players in South Africa’s rapidly growing telecom market, to new heights.

In this interview with Sujata Agrawal, Mr Pandey speaks about Neotel’s performance and prospects, the challenges of doing business in South Africa, and his experiences of what has been an enlightening assignment.

What is the South African telecom market like in terms of size, revenues, technology, pricing and ease of operation? Is it different from that in India and the rest of the world?
In telecommunications, as in other areas, South Africa is a leader in Africa. We estimate that the total market size is around R100 billion [$13 billion]; a sizable portion of this is mobile, an area in which Neotel is not active. In line with global trends, there is strong growth in data services, and this is a sphere that is central to Neotel.

In competitive terms the market is somewhat behind similar countries. Historically, true competition has been limited in the market, with the result that prices have not fallen like it has in India and elsewhere. As in other sectors, South Africa is a fascinating mix of developed and developing economies, which makes it very difficult to compare directly with other markets. The percentage of business operational expenditure and of household income spent on telecommunications remain high by global standards.

Neotel aims to challenge this status quo. We hope to reduce the cost of doing business whilst delivering the high-tech solutions that South African companies and consumers expect. We need to deliver the most sophisticated, high-end enterprise services, as well as cost-effective new services, to consumers.

Leveraging the experience of the Tata Group, in particular, Neotel aims to change the customer service paradigm in this country. In the past South Africans have had to put up with poor customer service in telecommunications, especially where choice has been limited. Neotel’s service standards are benchmarked against the best in the world, standards previously unseen of in South Africa.

How are your plans for the expansion of Neotel’s operations taking shape?Neotel was launched a little under two years ago, initially selling wholesale international voice and data services to the other telecoms players in South Africa. These first services utilised the global network of Tata Communications; we focused on building a high-capacity optical-fibre network that would enable us to move into the domestic wholesale market. With the completion of this leading edge network we successfully launched a range of voice, data and internet services for large enterprises in November 2007, living up to our promise of being South Africa’s first converged communications network operator.

Today, South African enterprises in the Gauteng, Cape Town and Durban metropolitan areas have access to a suite of services from Neotel that can replace many of their current services. Neotel offers flexibility, making customised solutions possible, scalability to meet growing communications demands, and the simplicity of a single provider source. In April this year we launched voice and high-speed internet services for consumers; we began to touch the lives of ordinary South Africans.

As a business, Neotel is growing in line with our plans. Managing that growth is part of the challenge we face. We now count more than 100 enterprises among our customers, combining the customer base of Neotel and Transtel. At the end of our first full year of operation (in March 2008) we had reached annualised revenues of over R1 billion [$130 million] between Neotel and then newly acquired Transtel business.

How are your objectives with the Transtel acquisition working out?
Above all, the acquisition of Transtel has enabled Neotel to scale up rapidly. The business we acquired was already a successful player in the South African telecom market, and we have gained expertise, along a number of major enterprise customers.

Transtel has over 100 offices and the skills to operate and maintain a countrywide network. It has experience in providing managed telecommunications services to Transnet, something that Neotel will leverage for the benefit of other business customers. We have begun the process of integrating the two companies, and will see further improvements in operational efficiency and other synergies over the next few months.

How crucial is the Tata Communications connection in Neotel’s business? Also, how is the Tata Group’s partnership with other stakeholders in Neotel panning out?
The Tata Group has demonstrated a commitment to South Africa, and, through Neotel, to the South African telecommunications market. Neotel works closely with Tata Communications on all of its international services. In addition to the initial wholesale services, Neotel has launched global versions of its converged enterprise voice and data services, which are delivered over the worldwide Tata Communications network.

In building the business, Neotel has tapped into the knowledge and experience of several Tata companies in the IT and telecom sectors, including Tata Communications, Tata Consultancy Services and Tata Teleservices. Nevertheless, Neotel is a South African business, predominant staffed by South Africans, and a significant contributor to Black Economic Empowerment (BEE) initiative. Neotel gains the best of both worlds from its shareholders: the backing of a global player as well as local knowledge and experience.

What do you make of the overtures that were made to MTN by Indian telecom companies?
MTN is a major mobile player across Africa and the Middle East, and a likely suitor for similar players around the world. There is nothing particularly unique in the interest shown by Indian telecom companies. The shareholding of South African telecommunications players is already fairly widespread, regionally and globally, and is likely to change over time. More so that many industries, telecommunications is increasingly a global business.

Could you tell us about your short- and long-terms goals, in South Africa and across the continent?
Our immediate goal is to continue the strong growth trend of the past year, this time in a more challenging economic climate. As our network reaches more and more enterprises and consumers, we aim to grow our share of these markets at an accelerated rate.

Neotel’s current focus is on the South African market, having been formed to secure a licence here. We will extend cross-border services to carriers in neighbouring countries in southern Africa (we already operate some international satellite services across the continent as a result of the Transtel acquisition). Beyond Neotel’s own focus on southern Africa, we will seek to align our plans with the broader Tata Communications plans for the continent’s markets.

South Africa is turning out to be the gateway for the Tata Group as it looks to consolidate its presence in the African continent. How important is it to do well in South Africa to realise the larger ambitions the Group has with regard to the entire continent?
While success in South Africa by no means guarantees success in other African markets, it does provide a springboard for entering other markets on the continent. Telecommunications is no exception to this rule, as witnessed by the success of South African telecoms companies that have become major players in several countries.

What are the big challenges of doing business in South Africa, especially given the country’s deteriorating law and order situation?
Current trends in South Africa point to matters improving on the crime rate upholding of the rule of law. On the economic front, South Africa has been remarkably resilient in the current global economic environment, though growth is certainly slowing.

As in many developing economies, companies doing business here face higher levels of uncertainty than in developed countries. The telecommunications sector depends to some extent on stable, well-defined regulation, and there has been some uncertainty in the transition to a more open market. Among the complexities is the strain higher growth rates have placed on infrastructure.

From a personal standpoint, what has been your experience of leading and managing a business operation in South Africa?  
It was not easy, but the journey so far has been satisfying. Building a multicultural and multiracial team has meant that one had to adapt to many situations on many occasions. The country has welcomed me with warmth and deep affection. I consider it to be my good luck, so far, that I am part of the history being made in the communications sector in South Africa.