Transcript of a radio interview i very unsuccessfully tried to record last nite:
http://transcripts.businessday.co.za/cgi-bin/transcripts/t-showtranscript.pl?1114045976
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Costly calls stunt job creation
Presenter: Lindsay Williams Guest(s): Truen, Vapi, Schussler
A report from Genesis Analytics says South Africans are paying too much for the cost of telephone calls. Economists are saying this will retard job creation. With Xolisa Vapi from Telkom, Sarah Truen from Genesis Analytics, and Mike Schussler and Lavan Gopaul from T-Sec
LINDSAY WILLIAMS: You’ve been following the Telkom share price from its listing - refresh my memory, where did Telkom list?
LAVAN GOPAUL: The listing price for Telkom was R28 per share. Of course, there were various discounts that were forwarded to a number of previously disadvantaged parties. You could have paid - I think it was in the order of about R24 or thereabouts for your Telkom share. It’s done very well for you - you’ve seen your stock go up four times, and of course bonus shares were awarded to loyal shareholders as well.
LINDSAY WILLIAMS: Closing at R107.90 today. In the last six months the share price has gone from the 70s to R108. It went to R115, I think at one stage - so we’re talking about a 50% to 60% move. Not a bad share to be in?
LAVAN GOPAUL: Not bad at all. I must confess though, two years back when the stock did list a lot of the smart money ignored it. They ignored the discount - they just walked away from it, and they thought this is going to be a dead deal.
LINDSAY WILLIAMS: Apparently it’s better to be a shareholder in Telkom SA than a customer of Telkom - a survey out today from Genesis Analytics shows there is a high price to pay for telecommunication services in SA - and that apparently this is depressing SA’s economic growth. It’s a subject that keeps on coming up - it’s about time that we took it a little more seriously! Genesis Analytics conducted the survey and found that prices are high - can you give us your findings?
SARAH TRUEN: Basically we chose six developing countries, and eight developed countries - we found that for the 10 products we examined South Africa’s pricing structure was the highest on five of those 10 products, and that South Africa’s price was higher than the average price on the sample for nine out of the 10 products. It’s pretty convincing - that South Africa’s prices don’t compare well on an international basis.
LINDSAY WILLIAMS: Can you give us the names of the other countries? Are they comparable countries?
SARAH TRUEN: Well, the eight developed countries probably aren’t what you’d consider to be comparable - we’re looking at places like Norway and Sweden. What we think is the strength of the survey - we’ve included countries such as Brazil, India, Malaysia, Morocco, the Philippines and Thailand. If you compare telecommunications prices to those countries alone - we looked at what the average price was for these developing countries - and compared the South African telecommunications prices. We included mobile prices. If you look just at the developing countries - South Africa’s prices were higher than the average for all 10 of the products for our developing survey sample.
LINDSAY WILLIAMS: Xolisa you heard what Sarah had to say - what it your reaction?
XOLISA VAPI: We are conscious of the fact that some of our prices are high compared to the charges of other international operators, and we are realise the need to lower prices - we have started that process as early as October 2004. We dropped our national and international calls earlier this year. We dropped our ADSL prices in November by 12%, and that process is continuing. In terms of Icasa’s price regulation - the prices for Telkom should come down in real terms, and we will do that in a very responsible manner, and that process is ongoing.
LINDSAY WILLIAMS: A responsible manner to me would be getting it down to a fair price without a slow process! I’m not sure of the technicalities, or how you work with Icasa, or what sort of impact it would have from an admin point of view for Telkom, and customers, to bring down prices - but the fact is you have just admitted that prices are too high and should come down. Why can’t you just do it straight away?
XOLISA VAPI: It’s being done. It can’t be done overnight! It can’t be done at one go. It is a process - remember we also have to manage our process of tariff rebalancing in a responsible manner… and there are many other challenges… Remember that the cost of operating the local loop in South Africa is very high. For years those local services have been subsidised by local and international calls. Those are the circumstances locally - as well as our need to be competitive internationally. It is a tricky balancing act but we are trying our best and I think we are in the right direction.
LINDSAY WILLIAMS: Sarah - what’s your reaction? Do you think that Xolisa’s points were valid? I personally, in my own simple way, think that if you can bring international call rates down two or three months ago - why not bring local call rates down to internationally comparable levels in one go?
SARAH TRUEN: Yes. I can just start off by pointing out that international call prices on our survey were the only product where the price is below the sample group - so there doesn’t seem to be a problem with the pricing of international calls. The problem is on the other nine products - the various business and voice products that we looked at. In fact, we conducted this pricing review for the first time in November 2004. Then, when Telkom revised its prices in February or March this year - and brought down prices like the ADSL price, for example, we were thinking that maybe the Telkom prices comparison would look better in 2005 than in late 2004 because of the price decreases - but what we found was that the international price environment had decreased even further in that time. So over those four months, or so, Telkom’s price performance actually deteriorated - in terms of the international comparison we did.
LINDSAY WILLIAMS: What sort of percentages are we talking about?
SARAH TRUEN: I can’t quote them off the top of my head, but there was a small incremental decrease in Telkom’s price performance.
LINDSAY WILLIAMS: The difference between Telkom South Africa’s prices, and say a country like India - would it be 10% higher on a charge for a local call, or would it be 50%? Even if it’s a rough number?
SARAH TRUEN: On business international calls we are 14% better than the average price. The next best product is mobile calls during off peak times - we’re 37% higher than the average price. The worst product that we found was international leased lines - where we are 400% higher than the average price of the sample group.
LINDSAY WILLIAMS: 400% did you say?
SARAH TRUEN: Yes, so we’re talking about some very big differences!
LINDSAY WILLIAMS: We are indeed. I spoke to Bernard Swanepoel last week - chief executive of Harmony Gold, one of SA’s largest mining operations. The company is under pressure for many reasons - the strong rand, high steel prices, high water prices. Listening to what he said during that interview: “Let’s face it, if a telephone call costs you 10 times more in this country than in the US - lets not pretend that we are competitive yet!” That was straight from the horse’s mouth - a real concern from a top businessman in South Africa. Do you think - in terms of economic development and growth in this country - a reduction in Telkom tariffs would aid those causes?
SARAH TRUEN: Yes. I think definitely. This is one of the interesting things about service industries like telecommunications - basically everybody uses telecommunications as an input. Its not only that high prices in telecommunications restrict output in telecommunications - they restrict output, potentially, across the entire economy. So there’s definitely a case to be made that high telecommunications prices would be restrictive for growth.
LINDSAY WILLIAMS: Mike Schussler, do you think that - in terms of telecommunications - it’s contributing to our inflation rate in SA? Could the inflation rate be lower?
[ continued in next post - text too long ]
http://transcripts.businessday.co.za/cgi-bin/transcripts/t-showtranscript.pl?1114045976
- - - - - - - - - - - - - - - - - - - - - - - -
Costly calls stunt job creation
Presenter: Lindsay Williams Guest(s): Truen, Vapi, Schussler
A report from Genesis Analytics says South Africans are paying too much for the cost of telephone calls. Economists are saying this will retard job creation. With Xolisa Vapi from Telkom, Sarah Truen from Genesis Analytics, and Mike Schussler and Lavan Gopaul from T-Sec
LINDSAY WILLIAMS: You’ve been following the Telkom share price from its listing - refresh my memory, where did Telkom list?
LAVAN GOPAUL: The listing price for Telkom was R28 per share. Of course, there were various discounts that were forwarded to a number of previously disadvantaged parties. You could have paid - I think it was in the order of about R24 or thereabouts for your Telkom share. It’s done very well for you - you’ve seen your stock go up four times, and of course bonus shares were awarded to loyal shareholders as well.
LINDSAY WILLIAMS: Closing at R107.90 today. In the last six months the share price has gone from the 70s to R108. It went to R115, I think at one stage - so we’re talking about a 50% to 60% move. Not a bad share to be in?
LAVAN GOPAUL: Not bad at all. I must confess though, two years back when the stock did list a lot of the smart money ignored it. They ignored the discount - they just walked away from it, and they thought this is going to be a dead deal.
LINDSAY WILLIAMS: Apparently it’s better to be a shareholder in Telkom SA than a customer of Telkom - a survey out today from Genesis Analytics shows there is a high price to pay for telecommunication services in SA - and that apparently this is depressing SA’s economic growth. It’s a subject that keeps on coming up - it’s about time that we took it a little more seriously! Genesis Analytics conducted the survey and found that prices are high - can you give us your findings?
SARAH TRUEN: Basically we chose six developing countries, and eight developed countries - we found that for the 10 products we examined South Africa’s pricing structure was the highest on five of those 10 products, and that South Africa’s price was higher than the average price on the sample for nine out of the 10 products. It’s pretty convincing - that South Africa’s prices don’t compare well on an international basis.
LINDSAY WILLIAMS: Can you give us the names of the other countries? Are they comparable countries?
SARAH TRUEN: Well, the eight developed countries probably aren’t what you’d consider to be comparable - we’re looking at places like Norway and Sweden. What we think is the strength of the survey - we’ve included countries such as Brazil, India, Malaysia, Morocco, the Philippines and Thailand. If you compare telecommunications prices to those countries alone - we looked at what the average price was for these developing countries - and compared the South African telecommunications prices. We included mobile prices. If you look just at the developing countries - South Africa’s prices were higher than the average for all 10 of the products for our developing survey sample.
LINDSAY WILLIAMS: Xolisa you heard what Sarah had to say - what it your reaction?
XOLISA VAPI: We are conscious of the fact that some of our prices are high compared to the charges of other international operators, and we are realise the need to lower prices - we have started that process as early as October 2004. We dropped our national and international calls earlier this year. We dropped our ADSL prices in November by 12%, and that process is continuing. In terms of Icasa’s price regulation - the prices for Telkom should come down in real terms, and we will do that in a very responsible manner, and that process is ongoing.
LINDSAY WILLIAMS: A responsible manner to me would be getting it down to a fair price without a slow process! I’m not sure of the technicalities, or how you work with Icasa, or what sort of impact it would have from an admin point of view for Telkom, and customers, to bring down prices - but the fact is you have just admitted that prices are too high and should come down. Why can’t you just do it straight away?
XOLISA VAPI: It’s being done. It can’t be done overnight! It can’t be done at one go. It is a process - remember we also have to manage our process of tariff rebalancing in a responsible manner… and there are many other challenges… Remember that the cost of operating the local loop in South Africa is very high. For years those local services have been subsidised by local and international calls. Those are the circumstances locally - as well as our need to be competitive internationally. It is a tricky balancing act but we are trying our best and I think we are in the right direction.
LINDSAY WILLIAMS: Sarah - what’s your reaction? Do you think that Xolisa’s points were valid? I personally, in my own simple way, think that if you can bring international call rates down two or three months ago - why not bring local call rates down to internationally comparable levels in one go?
SARAH TRUEN: Yes. I can just start off by pointing out that international call prices on our survey were the only product where the price is below the sample group - so there doesn’t seem to be a problem with the pricing of international calls. The problem is on the other nine products - the various business and voice products that we looked at. In fact, we conducted this pricing review for the first time in November 2004. Then, when Telkom revised its prices in February or March this year - and brought down prices like the ADSL price, for example, we were thinking that maybe the Telkom prices comparison would look better in 2005 than in late 2004 because of the price decreases - but what we found was that the international price environment had decreased even further in that time. So over those four months, or so, Telkom’s price performance actually deteriorated - in terms of the international comparison we did.
LINDSAY WILLIAMS: What sort of percentages are we talking about?
SARAH TRUEN: I can’t quote them off the top of my head, but there was a small incremental decrease in Telkom’s price performance.
LINDSAY WILLIAMS: The difference between Telkom South Africa’s prices, and say a country like India - would it be 10% higher on a charge for a local call, or would it be 50%? Even if it’s a rough number?
SARAH TRUEN: On business international calls we are 14% better than the average price. The next best product is mobile calls during off peak times - we’re 37% higher than the average price. The worst product that we found was international leased lines - where we are 400% higher than the average price of the sample group.
LINDSAY WILLIAMS: 400% did you say?
SARAH TRUEN: Yes, so we’re talking about some very big differences!
LINDSAY WILLIAMS: We are indeed. I spoke to Bernard Swanepoel last week - chief executive of Harmony Gold, one of SA’s largest mining operations. The company is under pressure for many reasons - the strong rand, high steel prices, high water prices. Listening to what he said during that interview: “Let’s face it, if a telephone call costs you 10 times more in this country than in the US - lets not pretend that we are competitive yet!” That was straight from the horse’s mouth - a real concern from a top businessman in South Africa. Do you think - in terms of economic development and growth in this country - a reduction in Telkom tariffs would aid those causes?
SARAH TRUEN: Yes. I think definitely. This is one of the interesting things about service industries like telecommunications - basically everybody uses telecommunications as an input. Its not only that high prices in telecommunications restrict output in telecommunications - they restrict output, potentially, across the entire economy. So there’s definitely a case to be made that high telecommunications prices would be restrictive for growth.
LINDSAY WILLIAMS: Mike Schussler, do you think that - in terms of telecommunications - it’s contributing to our inflation rate in SA? Could the inflation rate be lower?
[ continued in next post - text too long ]
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