What’s in a name? Everything as Telkom has discovered after wasting tens of millions of Rands in launching the 8ta network which has merely created an additional, illogical brand which Telkom itself – albeit despised by the majority of its own trapped landline users – has been forced to admit with this week’s rebranding to Telkom Mobile.
Launched with great fanfare three years ago, 8ta was intended to shore up the lost revenue from selling its 50% stake in Vodacom, which had previously contributed half of Telkom’s profit.
Suspicious industry analysts warned against brand dilution at the time, but the common thinking was a new, fresh, youth-focused brand would appeal to the prepaid market (which is still 80% of cellphone users in South Africa).
But as 8ta has learned – ignoring a similar brand and services repositioning by Cell C – prepaid is not where the big spenders are and is filled with churn. Telkom has clearly underestimated the value of bundled offerings which are hugely popular internationally, including landlines and cellphones.
The rebranding, which will see 8ta continue for the youthful market its aimed at, has been roundly criticised this week, as has the logo itself. The hand-written word “Mobile” appears under the usual Telkom moniker.
“First of all, the whole 8ta thing was ill considered because, for a company that should be appealing to all its customers, it appealed to only one section [the youth],” said the country’s marketing doyen Chris Moerdyk.
“They may be important, but its certainly not where all the spend is. By choosing a bad name, you completely sideline a whole lot of other people who you should be talking to. It was just silly.”
He added: “I did a survey a few years ago. There is about R50-billion a year that is wasted on really bad marketing. This is just an absolutely classic example. We waste so much money on ill-conceived marketing exercises.”
The current rebranding, is just the latest attempt by Telkom to return to some kind of profitability and respectability after years of stock market bloodletting caused by massive strategic blunders and the incessant, and incompetent, meddling by its largest shareholder, the government. Last August the Competition Tribunal fined Telkom R449-million for years of abusing its market dominance.
The loss of Group CEO Pinky Maholi, who resigned last year, will be keenly felt. Well-liked and respected in the industry, she has been a buffer to ministerial interference.
The 8ta rebranding is not the first extraordinarily poor strategic decision of this nature, all committed before Maholi appeared to right the ship and finally succumbed to the pressure of political meddling.
Telkom foolishly entered the Nigerian cellular market through a company called Multi-Links, which ultimately saw the entire investment scrapped and R10-billion of shareholder value destroyed. Telkom Media, an attempt at competing with a television channel by using the landline infrastructure for delivery as is done by cable companies internationally, was as devastating a blunder, blowing hundreds of millions of Rands. Both fiascos were roundly criticised by analysts at the time as not core to Telkom’s business.
This rebranding, however, will play to the strengths of Telkom Business, a generally more regarded division that focuses on the country’s corporate sector. It has better service, more reliability and a keen business sense under MD Brian Armstrong (tipped to replace Maholi when she leaves at the end of April) and mobile head Megan Nicholas, a respected cellular industry veteran.
Further, the new Telkom Mobile has access to significantly more radio spectrum – now arguably one of the most important aspects of a mobile business as the world shifts to faster 4G Long-Term Evolution (LTE) networks – than its much larger mobile competitors, Vodacom, MTN and Cell C.
Data is the new revenue stream for mobile operators, as voice calls decline and the increasing number of smartphones users become more data-centric.
Like last year’s ruling about it’s anti-competitive fixed line internet abuses, expect a competition claim against Telkom soon for the free-pass government has given it in this new mobile data universe with the radio spectrum for LTE
This column first appeared at City Press