http://www.fin24.co.za/articles/default/display_article.asp?Nav=ns&ArticleID=1518-24_1831494
Nov 10 2005 08:00:00:000AM
By: Chimwemwe Mwanza
Johannesburg - Apart from the bitter boardroom feuds that pitted Papi Molotsane against his subordinates resenting his elevation to CE of Telkom and the persistent tariff cut mantra led by consumer bodies, it seems that the controversy that South Africa's fixed line monopoly regularly fuels is far from over.
Though Government's big bang reforms announced in February may have set the tone for Telkom's tumultuous path since, it's the imminent arrival of the Second National Operator (SNO) that threatens to break its stranglehold on SA's telecoms sector.
It's arguable that Telkom - in a bid to jack up its tariffs - used aggressive, bullying and possibly dishonest tactics to block competition.
That resulted in Telkom rewarding its shareholders with handsome back-to-back dividends and also growing its market cap to its current R70bn plus.
However, Raj Raina, a business strategy lecturer at the Gordon Institute of Business Science (Gibs), says that Telkom's growth model is unsustainable in SA's liberalised telecoms environment.
Raina says that during Telkom's reign as a monopoly, it neglected to build a sustainable competitive advantage (SCA) critical to its survival.
An SCA is built from a combination of factors, including scale, scope, service quality, product uniqueness and efficiency.
Says Raina: "Monopolies globally tend to focus so much on profit maximisation - as opposed to serving public needs - that it's highly unlikely that Telkom would have considered issues such as service quality, product uniqueness and pricing as being core to its growth strategy."
Whether Telkom has a strategy to survive competition is questionable. However, Raina is adamant that Telkom's recent spat with stakeholders regarding its control of backbone infrastructure, such as the local loop and the undersea cable, is a consequence of Telkom facing up to the reality that its dominance has ended.
Says Raina: "Globally, public sector monopolies fall into the complacency trap and neglect to create competitive advantages against their rivals. Telkom may boast of its infrastructure but that's only one aspect of the argument."
Telkom's new SNO competitor will most likely exploit SA's low teledensity, much to its advantage. Raina also takes aim at the concept of public sector monopolies.
"In this competitive era they don't serve any purpose. It's arguable if Telkom served its mandate of taking telecoms services to previously underserviced areas. Yet as part of its monopoly extension Telkom was mandated to extend telecoms services to SA's rural households."
Raina argues that SA's broadband penetration - at 0.2% - is a result of its lack of teledensity and had contributed greatly to SA's slow technology uptake.
Nov 10 2005 08:00:00:000AM
By: Chimwemwe Mwanza
Johannesburg - Apart from the bitter boardroom feuds that pitted Papi Molotsane against his subordinates resenting his elevation to CE of Telkom and the persistent tariff cut mantra led by consumer bodies, it seems that the controversy that South Africa's fixed line monopoly regularly fuels is far from over.
Though Government's big bang reforms announced in February may have set the tone for Telkom's tumultuous path since, it's the imminent arrival of the Second National Operator (SNO) that threatens to break its stranglehold on SA's telecoms sector.
It's arguable that Telkom - in a bid to jack up its tariffs - used aggressive, bullying and possibly dishonest tactics to block competition.
That resulted in Telkom rewarding its shareholders with handsome back-to-back dividends and also growing its market cap to its current R70bn plus.
However, Raj Raina, a business strategy lecturer at the Gordon Institute of Business Science (Gibs), says that Telkom's growth model is unsustainable in SA's liberalised telecoms environment.
Raina says that during Telkom's reign as a monopoly, it neglected to build a sustainable competitive advantage (SCA) critical to its survival.
An SCA is built from a combination of factors, including scale, scope, service quality, product uniqueness and efficiency.
Says Raina: "Monopolies globally tend to focus so much on profit maximisation - as opposed to serving public needs - that it's highly unlikely that Telkom would have considered issues such as service quality, product uniqueness and pricing as being core to its growth strategy."
Whether Telkom has a strategy to survive competition is questionable. However, Raina is adamant that Telkom's recent spat with stakeholders regarding its control of backbone infrastructure, such as the local loop and the undersea cable, is a consequence of Telkom facing up to the reality that its dominance has ended.
Says Raina: "Globally, public sector monopolies fall into the complacency trap and neglect to create competitive advantages against their rivals. Telkom may boast of its infrastructure but that's only one aspect of the argument."
Telkom's new SNO competitor will most likely exploit SA's low teledensity, much to its advantage. Raina also takes aim at the concept of public sector monopolies.
"In this competitive era they don't serve any purpose. It's arguable if Telkom served its mandate of taking telecoms services to previously underserviced areas. Yet as part of its monopoly extension Telkom was mandated to extend telecoms services to SA's rural households."
Raina argues that SA's broadband penetration - at 0.2% - is a result of its lack of teledensity and had contributed greatly to SA's slow technology uptake.
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Nope don't remember Hertzog.