Telkom Mobile will never be profitable: analyst

[DXL]

But myBB reported recently that Voda will lose R500m per 6 months due to asymmetrical interconnect.
Let's assume MTN loses the same per 6 months.
Assuming a 50/50 split between TM and CC means R500m to each of them per 6 months, or R1bn per year each ONLY from interconnect!! (more likely to be R1.5bn to CC and R500m to TM in the real world)

Presuming your figures are correct - then both the small operators will have extra cash flow and can start re-investing into capacity issues - This done over a period of 3 years will help make the market very competitive.

South African Mobile networks don't have capacity to offer lower call rates.
Vodacom have realised that if they do not invest in their network there's going to be huge trouble in the future.
Vodacom & MTN thought that call rates will be at R2-50 per minute forever and that they are able to carry the volume comfortably.
R25 for 10 minutes of calling which costs R3 - surely I want to be in that business. then offer free calls between 23:00 - 05:00 when everyones sleeping.

We have 50 Million People in the country and 4 Networks so Each network should have capacity to offer services to 20 Million people.

MTN did the deal with Telkom Mobile simply to increase capacity on their network quickly.
Telkom Mobile's benefit is to have rural outlying areas coverage without spending any money on new towers.

Cell-C however are in the worst position in all of this however there is light at the end of the tunnel for them in Fibreco.

 

[TelkomUseless]

Well, they are almost bankrupt.

how do you know? Links? I want to swop to Cell C when my vodascum contract is done...

 

[me_]

how do you know? Links? I want to swop to Cell C when my vodascum contract is done...

Cell C is a private company so they don't have to make their book public, but they have received a number of large cash injections over the last few years and AKR has been drumming on that they need 25% market share to be viable (they are currently around 19%).
Also in the court filings for the MTR reductions, Cell C said that without the asymmetric MTRs (subsidies) from Vodacom & MTN, they would be in dire financial trouble.

 

[TelkomUseless]

Also in the court filings for the MTR reductions, Cell C said that without the asymmetric MTRs (subsidies) from Vodacom & MTN, they would be in dire financial trouble.

pinch of salt?

But well.. lets see what happens (hopefully they don't fold)

 

[me_]

pinch of salt?

But well.. lets see what happens (hopefully they don't fold)

No, I think they really are in trouble, but they are currently getting their subsidies now and by the time they re-evaluate the rates, there is a good chance that they will have the 25% required to be profitable so I wouldn't worry too much.

I just wonder if they will be able to keep their market share up. I know many people who have switched and aren't happy and are just waiting for their contracts to finish to switch again.

 

[me_]

However South Africans are very brand orientated and are reluctant to change.

Telkom actually has a negative brand image where their brand costs them instead of assisting them. Hence why Telkom originally launched Telkom Mobile as 8ta, but everyone knew Telkom was behind it so it didn't really give them any advantages.

With the call rates set to come down to 60c per minute I really cannot see any reason why people will not change.

It's still Telkom... They also run the risk of cannibalizing their fixed line business (the cash cow that allows them to be so aggressive) as the call rates will then be cheaper than their land line calls. As it stands, with the mandatory connection fee, you only pay more on a Mobile call after 6 minutes. If that happens, they will not have the luxury of spare cash available.
I would hate to be a Telkom exec right now. They have a massive problem on their hands and I don't think they have the capabilities to solve it.
The company is schizophrenic - you have the Mobile division being aggressive and pushing lower prices while the rest of the company is in defensive mode trying to protect their monopoly. There doesn't seem to be a clear corporate direction.