Telkom copper network spin-off: who’s interested?
Telkom is planning to spin its copper network off into a separate entity
Telkom is planning to spin its copper network off into a separate entity
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Telkom copper network spin-off
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koeksGHT
Dealer
Telkom is like stuff copper now, other ISP's can have it while they build fiber!
Peon
Expert Member
neonothing cant do ****, neonothing probably didint read the email as they dont know how to open outlook. Get points for trying....the last 6 years.
jannievanzyl
Telecoms expert
You seem to be confusing two entirely different matters.
Article is thin on facts. Are they collateralising the assets and issuing private placement bond issuances under a debt programme via an offshore spv for tax purposes?
Or are they simply using the spv as a holding company for the assets to ring-fence it on a balance sheet? Are the assets not already collateralised through existing Telkom debt?
Seems to me to be the latter, in which case it's simply Telkom selling off risk, but I suspect this will be at a massive discount. It's an admission of failure on their part to monetise their assets efficiently and now with their backs against the wall, are not prepared to accept the high risk of a copper network investment.
It does however leave them in a better cash and balance sheet position, particularly after the impairment process which allows for investment in their core strategies. But it will be a very difficult sell to the rest of the private market in this age. Where was this 5 years ago?
Or are they simply using the spv as a holding company for the assets to ring-fence it on a balance sheet? Are the assets not already collateralised through existing Telkom debt?
Seems to me to be the latter, in which case it's simply Telkom selling off risk, but I suspect this will be at a massive discount. It's an admission of failure on their part to monetise their assets efficiently and now with their backs against the wall, are not prepared to accept the high risk of a copper network investment.
It does however leave them in a better cash and balance sheet position, particularly after the impairment process which allows for investment in their core strategies. But it will be a very difficult sell to the rest of the private market in this age. Where was this 5 years ago?
Roman4604
Executive Member
I don't think anyone wants it for free, and you cant view it so simplistically taking into account the strategic economic outcomes that need to be achieved.
The situation we find ourselves in (like most other countries), a single expensive to maintain (& grow at a local level) copper network is the result of government policy over many decades in the past. Thinking one can rectify this purely on commercial terms, in a market as small as ours with fixed line players that are considerably smaller than the incumbent, is very unrealistic.
I agree with the creation of an independent SPV to manage the country's copper assets. FTTH for most is a distant objective and we still need to leverage the copper as best as possible for the short to medium term. I however cannot see industry funding this on its own, government needs to play its part to ensure local fixed line connectivity is competitive with global norms.
sitting on managements desk ...
different CEO and government is always a wobble on this
MightyMuffinMan
Expert Member
its what Ive been saying all along. The public is being lied to by them. They want the TAxman to buy it and subsidise their use. NB how they wanted wholesale unbundling not just the copper.
Roman4604
Executive Member
LLU itself is not the ultimate goal. Cost effective, competitive local access pricing is.
LLU together with structural separation are merely mechanisms to stimulate this outcome. While they can improve cost efficiencies, I don't think they can reduce the maintenance/growth costs in a significant enough manner to support major price drops.
So how else do we get our access pricing levels to international norms, there is only one answer, state funding/subsidy. While this may sound like another lame bailout, I contend this is one of the best investments the government can make for the future of all, going by studies showing the correlation between fixed line penetration & GDP growth.
I agree with most of what you have said above but to let government run any company or get to control any thing is a recipe for disaster.
It would be better if all stake holders in the ADSL /ISP arena ran a company that controlled the copper last mile and were forced to contribute towards extending and upgrading the last mile.( obviously large users must contribute more)
In the short term LLU is not going to bring down prices but in the long term it will depending on the model they choose.
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As JvZ suggests - I am maybe reading more into his post about people "confusing two entirely different matters" - this spin off isn't about LLU although it does have implications on LLU.
What we know is very little - we know that there is a lot of speculation that Telkom is looking to "spin off" parts of their copper network but not the ducts, servitudes and so on. Essentially if this speculation is true a major essential facility will be separated structurally from Telkom - of course this facility is dependent on other facilities which Telkom will still own - but the copper which is probably the most important dead facility (dead here because until you connect it to something on two ends it is meaningless) to build an EC network in the last mile. If the copper is seperately accounted for the case for "full" LLU is inevitable because providers can simply lease the copper from point to point and put on their own equipment. This ability puts pressure on Telkom to provide more cost effective products on a wholesale basis - oversimplistically it boils down to a question of whether the costs to install DSLAMs exceeds the costs of IPConnect.
For the ISPs this is a win regardless of what they do except if by doing nothing it doesn't happen - you have a potential tragedy of commons. The ISPs doing just this would be greed killing progress and so it makes me angry if it were to be the case. Of course I argued last year that IS is as big a problem as VC, MTN and Telkom and it seems the position has only marginally changed. Not only is their blanket refusal (other guys simply deferring) a problem but they are also knowingly lying about the value of the copper network and its maintenance costs etc...
Now if a person looks at the "government should invest" argument it is horribly misguided and self-serving.
As DJ points out this may be happening too late - especially from the point of rescuing Telkom - but that doesn't change the core fact that it is one tool Telkom has to become more innovative, regardless of what the ISPs do. LLU still has to happen and enforcing the facilities leasing regulations is the way to do it.
What we know is very little - we know that there is a lot of speculation that Telkom is looking to "spin off" parts of their copper network but not the ducts, servitudes and so on. Essentially if this speculation is true a major essential facility will be separated structurally from Telkom - of course this facility is dependent on other facilities which Telkom will still own - but the copper which is probably the most important dead facility (dead here because until you connect it to something on two ends it is meaningless) to build an EC network in the last mile. If the copper is seperately accounted for the case for "full" LLU is inevitable because providers can simply lease the copper from point to point and put on their own equipment. This ability puts pressure on Telkom to provide more cost effective products on a wholesale basis - oversimplistically it boils down to a question of whether the costs to install DSLAMs exceeds the costs of IPConnect.
For the ISPs this is a win regardless of what they do except if by doing nothing it doesn't happen - you have a potential tragedy of commons. The ISPs doing just this would be greed killing progress and so it makes me angry if it were to be the case. Of course I argued last year that IS is as big a problem as VC, MTN and Telkom and it seems the position has only marginally changed. Not only is their blanket refusal (other guys simply deferring) a problem but they are also knowingly lying about the value of the copper network and its maintenance costs etc...
Now if a person looks at the "government should invest" argument it is horribly misguided and self-serving.
As DJ points out this may be happening too late - especially from the point of rescuing Telkom - but that doesn't change the core fact that it is one tool Telkom has to become more innovative, regardless of what the ISPs do. LLU still has to happen and enforcing the facilities leasing regulations is the way to do it.
Roman4604
Executive Member
You're deluded.
So who else is going to pay for the shortfall between the network maintenance/expansion costs and the income should our local access pricing be reduced to globally competitive rates (say < R100 for voice/data local loop access)?
wait so you want government to subsidize connectivity - what is the tax rate you are after?
you also seem to ignore the fact that where government spends other peoples money (the taxpayer) they also pick the tune. Its the core ingredient for regulatory capture - - the basic problem we actually have in communications. There is also a wonderful spiral at work here and invariably when government is called to invest in something - take roads and stadiums for example - the tender recipients push up the costs and additional bailments and so on follow. Eventually government introduces greatly inflated user pay revenue forms - cue etolls.
Btw do you work for Broadband Infraco - they seem to be after 100 billion - or are you simply not understanding that government
I am very curious why you are making mention of a deeply problematic phrase "globally competitive rates" and seeing that your entire wish is to pay less than R100 for your access [without any indication of data costs] it seems self-serving about sums it up.
you also seem to ignore the fact that where government spends other peoples money (the taxpayer) they also pick the tune. Its the core ingredient for regulatory capture - - the basic problem we actually have in communications. There is also a wonderful spiral at work here and invariably when government is called to invest in something - take roads and stadiums for example - the tender recipients push up the costs and additional bailments and so on follow. Eventually government introduces greatly inflated user pay revenue forms - cue etolls.
Btw do you work for Broadband Infraco - they seem to be after 100 billion - or are you simply not understanding that government
I am very curious why you are making mention of a deeply problematic phrase "globally competitive rates" and seeing that your entire wish is to pay less than R100 for your access [without any indication of data costs] it seems self-serving about sums it up.
Roman4604
Executive Member
That's because you're thinking too small.
The whole point of the exercise is economic growth driven a connected economy. How do you think the S. Koreas, Lativas etc. of the world got to where they are? It cannot be done by industry alone.
PS: you still haven't answered who going to pay for the access line deficit?
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you clearly don't understand what the line access deficit actually is. It doesn't matter who purchases into the copper SPV the lines still have to be rented so unless your argument is that this facility must simply be bought by government to make available FOR FREE to licence holders there is still a leasing cost on the line which is paid over to the SPV who in turn distribute that revenue to the investors who have now parted with their money to invest. A line access deficit figure has been given a serious decline by Telkom having impaired the applicable assets by 12 billion rand and this exercise will lead to a situation where a very clear and transparent line access cost figure will exist - my guess is that it will be in the region of R150 but that is only from the exchange remember.
The last time South Africa "thought big" and introduced "globally competitive rates" it was on electricity to the large users group - yep cheap electricity and guess it didn't work. Of course the extent to which end tariffs were inflated by municipalities as the service providers won't be replicated by ISPs - except that we don't know that ...
The last time South Africa "thought big" and introduced "globally competitive rates" it was on electricity to the large users group - yep cheap electricity and guess it didn't work. Of course the extent to which end tariffs were inflated by municipalities as the service providers won't be replicated by ISPs - except that we don't know that ...