By Nicola Mawson, ITWeb senior journalist.
Telkom has finally woken up and smelled the roses, admitting to a conundrum that analysts have been pointing out for years.
The telecoms company, which for decades had a monopoly over SA's communications and still dominates the fixed-line market, has admitted it's too big and cumbersome to react to the changing landscape quickly enough.
Recently appointed CEO Nombulelo “Pinky” Moholi this week admitted the telco has “neither the agility to seize market opportunities nor the ability to absorb competitive pressures ad infinitum”. A “step change” in the way it invests and operates is vital, she declared.
Consequences
Now that local loop unbundling is finally on the cards for November, the company is umming and ahhing over what implications letting go of the last mile will have on its operations.Duh! For years, analysts have been pointing out that the huge “carrier” isn't nimble enough to turn around when the tide changes. Telkom has missed the boat several times by not reacting quickly enough to changes in the competitive landscape.
Moholi's comments, that Telkom needs to become more agile to cope in an ever-changing world, are a breath of fresh air. The telco must focus on areas that will aid revenue growth, and invest strategically instead of chucking money at ventures that burn cash, such as Multi-Links.
Telkom admits it needs to increase volumes to bolster revenue, and it will have to become more competitive to do so. Voice revenue, its traditional mainstay, is on the decline, a trend that's unlikely to reverse anytime soon.
Moholi wants the Independent Communications Authority of SA to back off, and stop regulating retail prices, as well as wholesale prices. If Telkom gets its way, it will be able to be much more competitive, supposedly benefiting end-users.
Too late
However, Telkom should have started worrying about competition almost two decades ago, instead of panicking about it now when the sector has moved on to a point where people are questioning the company's relevance.
Competition in the telecoms space arrived in 1994 when mobile operators were given the go-ahead to provide services. Telkom should have made a move then, but it didn't have to: it had a 50% stake in Vodacom, essentially a licence to print money.
In 2009, Telkom sold Vodacom, raking in a massive R40 billion profit. It took the company over a year to come up with the idea of competing with its former subsidiary by launching its own mobile arm, 8ta.
No-one expects 8ta to be a raging success and shake up the cellular market, and Telkom isn't surprised at the market's expectations. Judging by its previous well thought out, but badly executed growth strategies – Multi-Links, Telkom Media – the company has a lot of work to do to get 8ta right.
The cellular company will also need a lot of investment – R6 billion over five years – and is going up against competitors that have the market sewn up, and pockets deep enough to crush any newbies.
8ta isn't expected to be cash-generative until 2015, and until then the market can only hope it proves to be as successful as Telkom promises.
Missed opportunities
The combination of the cellphone company and Telkom's fixed-line operations should be a recipe for success in the converged space.
However, Telkom's competitors already have a head start in the converged space. Altech, Reunert and other competing telcos are battling it out to own market share in a world that is moving rapidly to IP-based communications where voice, data and video will meet on a converged platform.
Telkom still has to spend money on its networks to get rid of ancient switches and replace them with next-generation IP technology.
In fact, Telkom should have started rethinking its strategy three years ago when Altech took the late communications minister Ivy Matsepe-Casaburri to court to force the department to allow value-added network service providers to self-provision.
Altech's win paved the way for more than 400 value-added network services (VANS) to self-provide through electronic network services licences, instead of on-selling Telkom's services. Matsepe-Casaburri had doggedly opposed this concept since September 2004.
It didn't act then to mitigate any competitive effects. Instead, it sat back while companies started self-provisioning.
Collectively, companies such as Altech and Reunert are becoming serious forces to contend with. Neotel, which launched four years ago, has yet to turn into a believable second national operator. Despite the fact that it has yet to turn a profit, or garner the threatened 15% of market share, Neotel is eating into Telkom's profit.
This week, Telkom noted both Neotel and VANS “gained further traction,” hacking away at its share of the interconnection revenue pie.
On the contrary
Now that local loop unbundling (LLU) is finally on the cards for November, the company is umming and ahhing over what implications letting go of the last mile will have on its operations. Moholi called LLU a “major” risk.
Telkom should have started being concerned about LLU when it was first mooted five years ago. In fact, the clever thing to have done would have been to get the regulator to approve a plan that would have created a separate infrastructure company to host the last mile.
Problem solved. Telkom could have earned money, indirectly, by renting out the copper, and used that income to upgrade its infrastructure. Then it wouldn't be sitting with the worry of copper theft and outdated switches.
Instead, Telkom's full of arguments: there is no need to free the fixed last mile, the process isn't clear, November just isn't doable...
Consequently, the matter is likely to drag on for many more years while it and the regulator face off over a plethora of issues. And in the meantime? Smaller telcos that need access to the copper infrastructure to compete against Telkom have to find alternative solutions, or spend a fortune putting their own fibre into the ground.
Telkom can't have its cake and eat it. It can't suggest that the regulator back off and allow it to become more competitive while at the same time stand in the way of allowing more competition through LLU, a process that is years overdue.
Yes, Telkom is important to SA's economy, as Moholi took pains to point out this week, but if it doesn't get its strategy right now, it won't be relevant in five years' time. Too much is changing too fast.
- IT-Web
http://www.itweb.co.za/index.php?option=com_content&view=article&id=44573:stating-the-obvious&catid=267
