Vodacom to trim R7bn plans for fixed-line network

Thabiso Mochiko

Thabiso is the IT Editor for Business Day.

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Vodacom plans to scale back its R7 billion programme to build a fixed-line network, provided Telkom speeds up its network infrastructure upgrade.

In June Vodacom said it planned a nationwide roll-out of a fixed-line network to reduce backlogs, cut costs it was paying to Telkom for the lines, and sell spare capacity to the corporate market. Vodacom has applied for 8 000 lines from Telkom and 5 000 are overdue.

Telkom is spending up to R30 billion to upgrade its analog network to an internet-based service to improve efficiency and offer multiple services on the same platform.

Yesterday Vodacom chief executive Alan Knott-Craig said the group had committed R400 million to build a fixed-line network in major cities. So far it had laid fibreoptic cables in Johannesburg, which are expected to link up corporates. The move will improve earnings and generate revenue.

“We don’t need to build the entire network,” he said. “It will happen but not to the extent that we planned.”

Vodacom’s first-half data revenue increased by 45.2 percent to R2 billion, or 10.3 percent of total revenue. Telkom’s fixed-line data revenue grew 9.8 percent to R3.97 billion despite tariff reductions.

Vodacom expects to offer commercial fixed-line services by next March. It has already rolled out fixed lines in Mozambique and Lesotho, where it runs cellular networks.

Analysts expect double-digit growth in data revenue to continue for the next few years. Although it could contribute about half, this would not happen in the near future, said Dobek Pater, a telecoms analyst at Africa Analysis. The contribution would be significant as voice revenue, especially in fixed lines, continued to fall.

Frost & Sullivan analyst Spiwe Chireke said there was a strong demand for mobile data services because employees were increasingly working between different locations and they needed to stay connected.

The majority of the growth would continue to be from corporate subscriptions.

“There is increasing demand for data services across the continent,” Chireke said.

Telkom acting chief executive Reuben September described the data market as the “next wave” of growth. He said Telkom’s infrastructure building process was progressing “well to adequately meet the demands of bandwidth-hungry applications”, especially as Telkom was a key partner in delivering the 2010 Fifa World Cup to the global community.

“Our ability to do so seamlessly is dependent on the investment in our network.”

Telkom is pursuing a tie-up with MTN to help it offer cellular and fixed-line services on the same network and bid for dual licences.

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