Telkom boss throws gauntlet to rivals

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Sipho Maseko, Telkom’s boss, appears to be stepping up the tempo as competition intensifies in the telecoms space. By Gugu Lourie


Telkom – South Africa’s biggest fixed-line telephone group valued at R33 billion – is reinventing itself as a competitive entity as part of its turnaround strategy.

Telkom CEO Maseko and his team have so far done a sterling job to deal with internal challenges that were negatively impacting on the performance of the telco.

However, Telkom, which is pursuing its turnaround strategy, has done little work in attending to external challenges that are hampering the business from growing.

This is something Telkom has to and wants to fix.

Speaking at Southern African Telecommunications Networks and Applications Conference (SATNAC) in Hermanus, Maseko on Monday unveiled “competitive measures” to be adopted by Telkom to manage its infrastructure and test the waters to be an open access operator.

Telkom will open copper access at its 200 exchanges on a trial basis, thus effectively paving the way for a more open access approach,depending on the outcome of the trial.

Maseko called on mobile operators – Vodacom, MTN and Cell C – to join Telkom in bridging the digital divide.

“If we are to overcome the access deficit, and in light of the mobile revolution and the benefits this has engendered, South Africa needs to see wholesale access to the mobile local loop and active sharing of the radio access network (RAN).” said Maseko.

“This is an imperative and an important precursor for democratising broadband.”

He said Telkom remains commited to sharing RAN even though a previous attempt to team up with MTN SA failed.

Maseko also promised to deliver fibre-to-the-homes (FTTH) to one million houses by 2018.

If it implements the delivery of FTTH and became an open access operator, Telkom would be able to optimise its infrastructure and generate more revenues.

I recently spoke with Lloyd Nedohe, a businessman and MD of Village Broadband, a start-up that focusses on WAN and LAN infrastructure,

I asked for his views about Maseko’s plans to make Telkom more competitive?

Nedohe responded: “That is a noble ambition and should be palatable to Telkom shareholders and analysts who have seen the share price undervalued comparative to some upswings in global telecom stocks.”

He added: “It’s a tad late considering that local operators and Internet Service Providers have been calling for local loop unbundling and Telkom has been recalcitrant to the calls. With the new broadband policy recommending a defined and enforced open access regime, the decision to open up some infrastructure to competition will test the appetite for the copper loop and could be a strategic boon for local connectivity.”

That said, it is clear that Telkom is trying to adapt to the reality that it has to reshape its business model if it’s too remain competitive.

Asked whether Telkom’s reduction of the wholesale price is part of the move to be more competitive, Nedohe said with the amount of investment already made in the backbone and metro fibre rings around big cities, there was more than sufficient infrastructure capacities (both fibre and RAN) to stimulate a competitive wholesale environment.

In 2008, the high court of South Africa ruled in favour of Altech that Value-Added Service Providers could build their own networks or lease these facilities from firms such as Telkom.

Post the Altech judgement, the increase in investment by both public and private firms has resulted in over-capacities which could ultimately create the bedrock for cheaper wholesale interconnection and affordable consumer broadband.

Nedohe said: “With the benefit of such hindsight, it is a prudent call by Telkom, in view of looming competition from, among others, provincial WANS in Gauteng and Western Cape, which could lead to a subsequent flat termination environment.”

As part of Maseko’s move to make Telkom more agile and competitive, he wants to secure sub-1 Ghz spectrum for rural coverage and good indoor coverage in urban areas.

The sub-1 Ghz spectrum was allocated to Vodacom, MTN and Cell C, but Telkom was not given such spectrum. It was also a balancing act to avoid giving the telco the bulk of high-demand spectrum and then impose onerous universal service obligations (USO).

On Monday, Maseko called on South Africa’s telecoms regulator to consider its spectrum strategy to allow for fairer distribution.

“But with digital migration, a significant portion of (sub-1 Ghz spectrum) will be freed-up and Telkom mobile could be due some of it, which implies that they incur USOs as well, hence the call for some tax relief on key input obligations,” said Nedohe.

“That call for tax relief would benefit the industry, specifically with USOs and generally narrowing the digital divide.”

At Satnac, Maseko urged government to review import duties, which limit broader access to affordable smart devices costing less than R1 000.

In the future sub-1 Ghz spectrum will be competitive. It could be used by Telkom to deploy services in growing towns like Lephalale, where Eskom’s Medupi power station is being constructed, and could be a valuable spectrum for streaming and big events.

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Telkom Future Hood

One wonders whether all these moves by Telkom are likely to make it more competitive.

Nedohe said that the consolidation that’s prevalent in the market shows the levels of competition and market maturity, and firms are seeking new avenues for revenue and optimised cost structures.

“Statistics SA have shown big diffusion of mobile telephony in rural areas and it’s only a matter of time before the digital explosion drags more investment in smaller markets. Opening up access to infrastructure can only make Telkom more competitive and could also lead into further modernisation of legacy infrastructure, which would create a platform for local ISPs and cheaper data prices,” said Nedohe.

That said, it is vital to note that Telkom is beginning to realise that the industry’s direction lies with it and is using its infrastructure to drive growth in the industry.

While Maseko may not be not in  panic mode, he is doing what Telkom should have been done a long time ago to move forward.

If Telkom decided to be an open access operator and meets its fibre rollout, the firm will soon be a competitive powerhouse.

What counts in Telkom’s favour is the fact that it has managed to cut the fat in the business and outsourced non-core services. It is now able to step up the tempo towards  becoming a competitive entity.

Maseko and his executive team are still pressing the right dialing buttons on Telkom Mobile smartphones and fixed-line telephone device.

The road ahead is a long and full of challenges.

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