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Interview - Alan Knott-Craig: CEO, Vodacom
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14 November 2006
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MONEYWEB: Welcome to Vodacom chief executive Alan Knott-Craig. I suppose interesting coming up straight after Papi Molotsane. He is your 50% shareholder. What kind of relationship does Vodacom have with Telkom?
ALAN KNOTT-CRAIG: Actually these days I think we have the best relationship we’ve had in 12 years. So yes, Papi has been really great for us, very encouraging in getting things done together.
MONEYWEB: What’s changed?
ALAN KNOTT-CRAIG: Well, I guess the first thing is the Americans went back to America. So that helped a little bit.
MONEYWEB: And the Malaysians went back to Malaysia.
ALAN KNOTT-CRAIG: Although I found them a lot more easier to work with. And so we are dealing directly with South Africans back in Telkom now and actually I think the atmosphere between the two companies is better, it’s more constructive. We have done a lot more things in the last six months than we’ve done in the last 12 years, quite frankly. And if we get the other things that we have in the planning stage right, I think we will get some more interesting things done.
MONEYWEB: That’s fascinating. Broadcasting is something Telkom is going into, Papi was telling us. You are there already. You are already delivering to, what, 20 000 subscribers, some kind of television?
ALAN KNOTT-CRAIG: Well, we have about 23 000 subscribers using their cellphones to watch TV. I’m one of them. I didn’t think I would ever do that. But actually when I wake up in the morning, I watch the news on my phone – quite an odd thing to do I suppose. And yes, we actually think that when we get into the TV business, and we will get into the TV business, that it could be bigger than our data business – which has become a significant business. It's a R3bn-plus business these days. So I think TV could be bigger than data and I think data can be very big.
MONEYWEB: We’ll get back to TV in a moment. But, as far as data is concerned, again, going on this broadband trail, and just to quote Papi correctly, what he said in his results – he said it’s imperative to take our customers, South Africans, into the future ICT landscape. How do you see this future ICT landscape, because you have been pretty aggressive in rolling out broadband? Moneyweb is now a customer at HSDPA, and all our reporters are giving it rave reviews at how quick the speed is.
ALAN KNOTT-CRAIG: Yes, it is quick and it will get quicker next year again, and the year after that again. So, at the moment, I think you are talking about maybe 1 meg. Those [indistinct] will get up to 10 meg in the next couple of years. So, really, what we are saying, I think where Papi is coming from, is that, South Africa, we are considered to be pretty much a first-world country, but it doesn’t really have the first-world telecoms infrastructure datawise that other countries do. So if you go to North America, Europe or countries like that, most homes have got cables in, they can do very high-speed anything from the homes. We don’t have that in this country. And if you actually look at the high-speed data penetration in our country, it’s nowhere. So that is a great big space which can be filled and which needs to be filled. And if we don’t fill it properly, just from the economy’s point of view, we will never grow our economy as much as we can. We have to be on the same footing as countries like North America and like Europe. So, from that point of view, I think Papi is spot-on. From the point of view of there being a big market out there which we can enter, do something with, gain revenues, grow, be aggressive in, be innovative in 100%, we can leapfrog a couple of generations of technology and go into just the newest, the greatest, grandest, cheapest stuff available, and give people a good service.
MONEYWEB: What is interesting is while Telkom has doubled to 190 000 broadband subscribers, you have risen exponentially in the past year from 18 600 to 87 000. That would suggest the lady I saw at Incredible Connection, who was signing up these HSDPA accounts, is maybe even under-estimating the number of people coming through the doors.
ALAN KNOTT-CRAIG: I think so. But in the end it will depend on a few things – if we can get the speed up, even higher, that’s critical, [and] if we can get it really reliable. It’s got to more reliable than it is today. It’s much better than it was a year ago, but it has to be more reliable than that. We have to get the price down of the product. If we can do those three things, you hardly have to market it. The market is sitting waiting for a high-speed, low-priced reliable product. And if you can make it wireless, which makes it very, very convenient, then I think it can assert itself.
MONEYWEB: Any idea how big that potential market might be?
ALAN KNOTT-CRAIG: It’s difficult to say, but I would guess that South Africa could probably easily have a population of high-speed data users of around six million – that’s what I think. And right now, they probably have a population of less than half a million. So we’ve got I think a big market which we can fill and a market which doesn’t have to be persuaded that they need this, that doesn’t have to find the money to spend on this. They are ready to use it, they have the money – they are just waiting for someone with a good product.
MONEYWEB: Would you be delivering television through that market as well?
ALAN KNOTT-CRAIG: You can deliver television to that market – IPTV is that kind of game. But actually I think you can probably deliver television even more efficiently over new types of broadcast networks, land-based broadcast networks, some particularly geared to mobile phones, which is the one that I am particularly interested in. But yes, I think there are lots of ways to deliver TV and I think it’s also an area which has been unexploited, and which technology in the last year has made exploitable, if you like.
MONEYWEB: Naspers is running a pilot project at the moment, where it offers 11 channels. You’ve got more than 20 000 people who are watching television on their mobile phones at the moment. What do you see the next steps of development being on that side?
ALAN KNOTT-CRAIG: Well, what we have to decide – and we pretty much made up our minds what to do – is we either have to start afresh, real greenfields, build a whole transmission network, get into the content business, buy content, compete with Naspers, and do the whole number over again. I think that that’s a very expensive way to do things, I don’t think it’s a very efficient way to do things, and I’m not sure that we will get the kind of penetration and the low cost if we all try and do that. So at the moment we have an agreement with MultiChoice, where they are really building the broadcast network which we will use, together with other people. They certainly have a good grip on content and we think through a commercial arrangement we can achieve as much without the capex.
MONEYWEB: Fascinating stuff. Let’s just look at the results quickly, if we can, Alan. You have once again increased your market share here in South Africa – 59% of people who have got cellphones have got Vodacom accounts. And it’s more than 20m people. These are enormous numbers when one looks at it. But the rest of Africa – you did start at a disadvantage but do seem to be growing quite strongly now?
ALAN KNOTT-CRAIG: Yes. Tanzania and the Congo are doing well. It’s a pity that we couldn’t get into some bigger countries earlier but now that we can we are going as quickly as we can. We are playing catch-up, no question about that. Will we ever catch up? Probably not. But we are going to give it a helluva good shot.
MONEYWEB: And the other thing you are doing here which was quite interesting – David Shapiro, just take a flyer at how much Vodacom’s network has cost it in South Africa, the capital expenditure.
DAVID SHAPIRO: R20bn?
MONEYWEB: R25.8bn. And they spent in this six months R2.5bn. Do you have to keep spending at that kind of rate?
ALAN KNOTT-CRAIG: Well, if the customers keep growing at 20%, yes. And if we want to keep introducing new services, yes. And the fact of the matter is, that technology changes so quickly these days that if you don’t spend the money you are going to end up with an old-fashioned network, which nobody wants. And it’s very difficult then to recapture the market you’ve lost. So you’ve got to stay ahead with technology, you’ve got to keep the base that you fought so hard to get. I mean, the most expensive thing we do is not build a network, it’s getting customers and keeping customers. That’s the expensive bit about running a network. So if we are going to be spend R5bn, plus/minus on acquiring and keeping customers, we may as well spend R2.5bn building a network.
MONEYWEB: Well, you’ve got next to you, another entrepreneur, fellow entrepreneur, Dale Hefer from Chillibush, who is one of the finalists in the Ernst & Young Emerging Entrepreneur of the Year. And she’s also in the advertising industry. So we’ve got to finish with you with a guy called Robbie Wessels and Leeuloop. Where did you get the idea to introduce such a fascinating media or advertising campaign that it seems to have grabbed particularly the rugby-watching public.
ALAN KNOTT-CRAIG: To tell you the truth, first of all I became aware that one of the highest-selling music CDs in the country was Afrikaans. I didn’t know that, and so clearly Afrikaans has seen quite a rebirth in terms of music and identity etc, etc. So we thought it would be quite a good idea to target that market in a very focused manner. So once I’d got to that stage, people started playing me all this Afrikaans music – and I don’t know how much music I listened to, but this Leeuloop thing really tickled my fancy. I actually didn’t know what it meant, I know now.
MONEYWEB: And well done for taking it off in the Irish game on the weekend – I don’t think that would have added much value.
ALAN KNOTT-CRAIG: Yes, that wasn’t much fun anyway, was it?
MONEYWEB: Alan Knott-Craig, chief executive of Vodacom.
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Original Article Link: |
http://www.moneyweb.co.za/moneyweb_radio/mny_power_hour/411611.htm
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