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From: www.moneyweb.co.za
SA’s telecoms leg-irons
By: Belinda Anderson
Posted: 2004/04/13 Tue 16:50 | © Moneyweb 1997-2004
Tourism, cheap electricity and a vibrant motor industry are arguably some of South Africa’s competitive advantages. But, the still largely-uncompetitive telecommunications environment – specifically for broadband – is often cited as one of the country’s economic leg-irons.
One industry that could create thousands of jobs in SA and help grow the economy is in call-centre outsourcing. So far, with some effort from business and government, there has been limited success in winning outsourced call-centre business away from the global hub of India, such as that with UK insurer Budget. SA is marketing itself as a value-added destination, rather than the cheapest on earth, citing advantages such as the time zone, English as a first language and the large pool of educated, but unemployed people who can be trained up as call centre agents.
However, cost comes up as an issue of concern. At a recent visit to Dimension Data – which has won some call-centre business – recent CEO appointment Brett Dawson bemoaned the fact that bandwidth prices were still too expensive and said the strong rand was not helping either. Dawson said call centre outsourcing could be a huge opportunity for the country, but it was not getting what it deserved, nor was it likely to under the current conditions. Dawson said competition to Telkom was essential: “It is an absolute travesty that we do not have a viable SNO (second national operator) in place.”
The delays in licensing an SNO to compete with landline incumbent Telkom stand out like a sore thumb. And in the process, Telkom has grown stronger – to the advantage of shareholders that have seen the price rise from R28 at listing to more than R85.
Last month, Telkom gave analysts an update on its business, and as a part of the presentations, told how it had 86% of its corporate clients tied into long-term contracts. It also boasted the launch of numerous new data and voice services. But, in the same breath, it said it expected to lose between 10% and 15% of its market share in the first three to five years of the SNO being operational.
That is when (and if) the SNO finally does get up and running. At the moment, that is still some way off. And the longer it takes, the stronger Telkom becomes. The already drawn-out process was delayed further last year when government apportioned the 51% stake meant for an international operator in part to both consortia bidding for the stake and kept a 25% stake aside to be awarded later. Doing so led – almost inevitably – to the much-publicised shareholder infighting that ensued.
This week’s Business Times quoted SNO interim committee head Karl Socikwa saying the SNO had agreed on an interim business plan, which had been handed over to government for approval. But, Socikwa could still not provide any certainty about when the license would be granted, other than to say it was “getting close”.
But, in the meantime, SA becomes even less competitive. Just last month, global energy and telecoms consulting group NUS Consulting published research that found Telkom’s call costs were the highest among the fourteen countries it covered. Other countries included in the survey were the US, Australia, Netherlands, Italy and the UK. George Rahr, SA managing director of NUS Consulting, warned at the time that there was only a limited window of opportunity for any SNO entering the SA market: “This opportunity is shrinking every day that entry is delayed. The potential market share for the new entity is also shrinking,” he said.
He predicted that the market would only become competitive from 2005, as “warring shareholders” would take to become a unit capable of tackling Telkom.
Gartner principle analyst Bhawani Shankar said in a December report that state-owned signal distributor Sentech’s recently launched wireless local-access services promised savings over Telkom’s prices. But, he warned any potential buyers of services from the new operator to be cautious and study the new company. He said consumers should also bear in mind that by retaining a 25% stake, government was the largest shareholder, with its ownership of 30% shareholders Eskom and Transtel.
Although the extent of Sentech’s success – in drawing subscribers and rolling out the service – remains to be seen, the operator has embarked on an aggressive marketing campaign, and has extended the service to Durban, from just some suburbs in Johannesburg.
Government recognized that SA was falling behind in the digital age with the introduction of the draft Convergence Bill, published last year. But, while legislation changes and services like Voice over Internet Protocol (VoiP) remain illegal, the world moves on. VoiP enables cheaper calls over the Internet. An article in Tuesday’s Financial Times told how the US telecoms industry is being shaken up by the introduction of VoiP, called a “disruptive technology” by Federal Communications Commission chairman Michael Powell.
The technology, if allowed, would indeed be a disruptive one in South Africa too – it would shake up Telkom. But, with a bit of luck Telkom will be shaken up by competitors such as Sentech and the SNO in the nearer future.
SA’s telecoms leg-irons
By: Belinda Anderson
Posted: 2004/04/13 Tue 16:50 | © Moneyweb 1997-2004
Tourism, cheap electricity and a vibrant motor industry are arguably some of South Africa’s competitive advantages. But, the still largely-uncompetitive telecommunications environment – specifically for broadband – is often cited as one of the country’s economic leg-irons.
One industry that could create thousands of jobs in SA and help grow the economy is in call-centre outsourcing. So far, with some effort from business and government, there has been limited success in winning outsourced call-centre business away from the global hub of India, such as that with UK insurer Budget. SA is marketing itself as a value-added destination, rather than the cheapest on earth, citing advantages such as the time zone, English as a first language and the large pool of educated, but unemployed people who can be trained up as call centre agents.
However, cost comes up as an issue of concern. At a recent visit to Dimension Data – which has won some call-centre business – recent CEO appointment Brett Dawson bemoaned the fact that bandwidth prices were still too expensive and said the strong rand was not helping either. Dawson said call centre outsourcing could be a huge opportunity for the country, but it was not getting what it deserved, nor was it likely to under the current conditions. Dawson said competition to Telkom was essential: “It is an absolute travesty that we do not have a viable SNO (second national operator) in place.”
The delays in licensing an SNO to compete with landline incumbent Telkom stand out like a sore thumb. And in the process, Telkom has grown stronger – to the advantage of shareholders that have seen the price rise from R28 at listing to more than R85.
Last month, Telkom gave analysts an update on its business, and as a part of the presentations, told how it had 86% of its corporate clients tied into long-term contracts. It also boasted the launch of numerous new data and voice services. But, in the same breath, it said it expected to lose between 10% and 15% of its market share in the first three to five years of the SNO being operational.
That is when (and if) the SNO finally does get up and running. At the moment, that is still some way off. And the longer it takes, the stronger Telkom becomes. The already drawn-out process was delayed further last year when government apportioned the 51% stake meant for an international operator in part to both consortia bidding for the stake and kept a 25% stake aside to be awarded later. Doing so led – almost inevitably – to the much-publicised shareholder infighting that ensued.
This week’s Business Times quoted SNO interim committee head Karl Socikwa saying the SNO had agreed on an interim business plan, which had been handed over to government for approval. But, Socikwa could still not provide any certainty about when the license would be granted, other than to say it was “getting close”.
But, in the meantime, SA becomes even less competitive. Just last month, global energy and telecoms consulting group NUS Consulting published research that found Telkom’s call costs were the highest among the fourteen countries it covered. Other countries included in the survey were the US, Australia, Netherlands, Italy and the UK. George Rahr, SA managing director of NUS Consulting, warned at the time that there was only a limited window of opportunity for any SNO entering the SA market: “This opportunity is shrinking every day that entry is delayed. The potential market share for the new entity is also shrinking,” he said.
He predicted that the market would only become competitive from 2005, as “warring shareholders” would take to become a unit capable of tackling Telkom.
Gartner principle analyst Bhawani Shankar said in a December report that state-owned signal distributor Sentech’s recently launched wireless local-access services promised savings over Telkom’s prices. But, he warned any potential buyers of services from the new operator to be cautious and study the new company. He said consumers should also bear in mind that by retaining a 25% stake, government was the largest shareholder, with its ownership of 30% shareholders Eskom and Transtel.
Although the extent of Sentech’s success – in drawing subscribers and rolling out the service – remains to be seen, the operator has embarked on an aggressive marketing campaign, and has extended the service to Durban, from just some suburbs in Johannesburg.
Government recognized that SA was falling behind in the digital age with the introduction of the draft Convergence Bill, published last year. But, while legislation changes and services like Voice over Internet Protocol (VoiP) remain illegal, the world moves on. VoiP enables cheaper calls over the Internet. An article in Tuesday’s Financial Times told how the US telecoms industry is being shaken up by the introduction of VoiP, called a “disruptive technology” by Federal Communications Commission chairman Michael Powell.
The technology, if allowed, would indeed be a disruptive one in South Africa too – it would shake up Telkom. But, with a bit of luck Telkom will be shaken up by competitors such as Sentech and the SNO in the nearer future.