Cellphones set to make the bigger connection
THE growth in the cellular telephone market since 1994 surprised everyone, including the network operators. Vodacom has about 730 000 subscribers and MTN is thought to exceed 550 000. This combined subscriber base is more than four times what was projected at this stage in the industry's development.
Vodacom managing director Alan Knott-Craig recently projected a combined cellular subscriber base of 2-million by the end of 1998, 4-million by 2000 and 10-million within 10 years.
That probably means there will be more cellular than fixed phone users within five or six years, notwithstanding Telkom's programme to roll out millions of fixed lines over the next few years.
These projections imply virtually unlimited growth potential for Teljoy Cellular, which is reckoned to have about 20% of Vodacom's subscriber base.
The growth in the cellular market speaks volumes about public perceptions of Telkom's service, although the existence of connection bonuses did much to boost sales of air time contracts. Many cellular subscribers paid little or nothing for their handsets. The more recent introduction of pre-paid cellular services provided a further shot of adrenaline to the market.
After a period of consolidation and restructuring at Teljoy Cellular, the systems and administration are now in place to resume a more vigorous pursuit of cellular market share. A decision was made during the 1997 financial year to allow the cellular division's market share to decline. Despite this, the number of subscribers grew 6% to 109 000 by March 1997.
Vodacom spokesman Joan Joffe says: "We are happy with our investment in Teljoy and commend management for their hard work ."
Over the year to March 1997 Teljoy Cellular kicked in with revenue of R418.4-million, 12.6% higher than the previous year, and a profit before exceptional items of R17.6-million, compared to a 1995 loss before exceptional items of R60.1-million.
When Teljoy chief executive Johann Pieterse took over in 1996, he identified six areas of focus for the cellular division: gross margin, churn, expenses, bad debts, team work and customer service. Each area was addressed in turn. Staff and management were involved in the restructuring process.
"We have been amazed at what has been achieved by involving people in decision-making - the results speak for themselves," says Pieterse.
There was a gradual improvement in all areas until the cellular division recorded its first profit in November 1996. Since then, it has made a profit every month.
One area in which Teljoy has always excelled is marketing. Air time contracts were traditionally sold through retail chains, but only recently was the decision made to market through Teljoy's network of 54 retail outlets located in the major urban centres. Since this decision was made just over a year ago, sales of cellular contracts through the store network multiplied 10-fold, while sales of cellular accessories doubled each month since inception.
"The stores are now a major source of new cellular sign-ups," says Bev Jefferies, marketing manager at Teljoy Cellular. "We are continuing to market through the major retail chains, but the growth in sales through the Teljoy store network is most encouraging."
The cellular division's decision to market through the group's branded retail network conforms with international experience, which shows that an ever-increasing share of cellular contracts and accessories are now sold through stores operated by service providers, rather than through third party retail chains. This is because cellular purchases require a degree of specialist knowledge not generally found in the retail chains.
A number of value-added services have been introduced to promote customer loyalty with a view to reducing the rate of churn - already down from a peak of 34.5% to 21%, now roughly equal to the industry average.
Jefferies says it costs R2 000 to attract a new customer but just R500 to retain him. The marketing budget has now been split 50-50 between campaigns aimed at new customers and retaining existing ones.
Among the value-added services are Teljoy Emergency 911 - an emergency service which has been a life saver on several occasions - and Teljoy Cellphone Insurance. Teljoy has an excellent fraud control programme enabling it to disable stolen phones and monitor unusual call patterns. Given the escalation of crime in recent years, these services provide greater assurance to subscribers and are well utilised.
The restructuring and turnaround of the cellular division is not yet complete, says Pieterse. The focus in the current financial year will be on:
ý Continuing the restructuring process, implementing further changes to the systems and business processes in preparation for the next growth phase;
ý The enhancement of systems and the completion of all internal policies and procedures;
ý Further automation of business processes;
ý A review of long-term information systems strategy;
ý Further strengthening of management;
ý Defining a strategic vision for the future;
ý Renewed emphasis on training;
ý Consolidation and improvement in those areas already successful.