Article published in Balancing Act Africa on 2007-06-24
A new VoIP reseller called has entered the African market unobtrusively over the last few months and is now selling in some quantity in eight countries. So what you might say? Aren’t they a dime a dozen? Yes, but this one is offering retail prices to key destinations that almost match wholesale prices and claims to be offering high quality calling. Furthermore this is a company that has developed a free SIP plug-in for a Nokia phone and has an ambition to sell minutes to mobile users. Russell Southwood spoke to Havar Bauck, VP-Sales, Africa of Vyke about a company whose plans look like the worst nightmares for the sleepier of Africa’s incumbents and mobile operators.
Vyke offers VoIP calling minutes and the more traditional call-back services. The whole operation is extremely straightforward. The end-user signs up on a web-site, buys a scratch card and then sends an SMS to activate the account. On call-back services, you can send an SMS to get a number to call-back. You can buy credits in small quantities on pre-pay cards or in larger quantities through its reseller network. The calls can either be made using a soft phone on a laptop or PC or using a special VoIP phone or downloading a SIP client on to a Nokia Series 60 V.3 phone. The latter is not the cheapest thing on the market but promises to be the first of several more.
The company is looking for resellers who in the words of Bauck “have a broad network of customers.” These will often be individuals or companies selling to cyber-cafes and call-shops. He is also looking for companies who can get into chains of shops like travel agents who will be able to target incoming tourists going on safaris. “We are very selective about who we take on. Resellers get a significant discount that is built into the pricing structure, typically 30% and above.” The company currently has a presence in Kenya, Uganda, Ethiopia, Angola, Zambia, Nigeria, Burundi and DRC.
In the Middle East, it is a major supplier to call-shops and in some countries it has over 50% of the market. Typically these are small call-shops used by Indian and Bangladeshi migrant workers. It is also very big in the call-shop market in Europe, targeting migrants who are calling home.
What makes Vyke unusual is that its retail prices to major destinations look more like wholesale prices. It costs US1.8 cents to call the USA. Former imperial countries are slightly more expensive but extremely cheap by any comparison: Belgium: US3.3 cents ((US35 cents to mobiles); France: US2.1 cents (US22.9 cents to mobiles); Portugal: US2.8 cents (US29.9 cents to mobiles); UK: US2 cents (US25.9 cents to mobiles).
How do they achieve such low rates?:”We have good agreements with lots of carriers.” But what kind of quality can you get at this price?:”We offer the best quality. We have a team that does active follow-up on quality problems. We track down the weak links and re-route them.”
The company has found that there has been enormous growth since it started selling in Africa and has several countries where it is regularly selling tens of thousands of dollars worth of minutes. According to Bauck:”The demand seems almost bottomless.” The company has an overall turnover of US$35 million but Bauck would not give the turnover share of Africa, only saying “it’s a small proportion of overall turnover but Africa is a strategic market for us.”
Its long-term ambition is the scary bit for existing mobile operators. It wants to be a “leading mobile VoIP operator”. As Africa’s incumbents adjust their international rates to more competitive levels, mobile operators have had to follow suit. But there is still a significant price differential between the two. And this takes us back to the mobile paradox.
Once you’ve more or less built a network, it’s considerably cheaper to connect mobile subscribers than it is on a fixed network. But the cost of calling on a mobile network is more expensive than on a fixed network. Go figure. However, mobile VoIP calls at ever cheaper prices may soon begin to introduce convergence in the kind of practical sense the consumer might want.