South Africa's internet service providers are scrambling to capture unconnected segments of the market with hundreds of players vying for control. A new player, HeroTel, is taking to the field with plans to consolidate the industry.
HeroTel is a wireless broadband provider but instead of trying to start from scratch, it is banding networks together, apparently making it faster for the consumer and less expensive.
“We are just taking an existing fragmented industry of wireless internet service filers and we are consolidating them under one single brand and network so that it’s a consistent experience for consumers looking for an alternative to a fixed line," said Alan Knott-Craig Jr, Founder of HeroTel.
"People want fast reliable, affordable broadband, that's all they want, and they don't want you to feel like you're doing them a favour by arriving to fix it, so in the absence of decent fixed line options in the country you've got this massive industry of wireless internet service providers.
He explains there are about 200 wireless service providers across the country, totalling revenues of about 700 million rand or 53 million dollars with an average profit margin of about 30 per cent but are not national brands.
“Our idea is really we are going to try to do what Capitec is doing for banking, we are trying to create the Capitec of telecoms by consolidating all of these small guys and offering consumers one single place,” said Knott-Craig.
HeroTel is different in that it uses Wi-Fi technology, “you want to be part of an ecosystem that the world is following, there's lots of device penetration and there's a hell of a lot of equipment investment”.
Knott-Craig says South Africans can expect ten times more megabytes by 2019 for the same amount.
“Right now you can expect about ten megabytes per second on a wireless broadband connection for about 600 rand a month, in four years from now, you can get 100 megabytes for 600 rand a month,” Knott-Craig told CNBC Africa.
“Every single year, Wi-Fi speeds are doubling and at the same cost Knott-Craig says you should be getting double the speed at exactly the same price, in fact you should be paying less every year and getting double the speed.” He adds.
His main objective is not to try and recreate the technology, just giving the technology a platform.
“Don't reinvent the wheel, don't get sucked into a technology road map that means you have to keep investing in your infrastructure and don't even think about technology in networks anymore, as in bordered, just think about customer services being the most important thing.”
He adds: “The more people in South Africa that are on the grid, whether it the poor or the rich, the faster our economy can grow, the more jobs can be found the more entrepreneurs can start their businesses and you know this is a very small little lever you can push that can affect a lot of people’s lives in the country and at the very least for me I think HeroTel is an opportunity to build some serious wealth.”
However, consumers shouldn’t rush out to buy the service, Knott-Craig told CNBC Africa that the new company had to make an announcement as it was under pressure.
“If you want to go get HeroTel bandwidth today, you're going to be disappointed because it is not available to the public right now,” said Knott-Craig.
HeroTel was formed following the acquisition of Stellenbosch-based Snowball, and Cloud Connect, based in George – the company is funded by an investor consortium including former First National Bank, CEO Michael Jordaan, former Rand Merchant Bank, CEO Mike Pfaff and Chief Investment Officer Derek Prout-Jones.