Telkom will switch east for equipment suppliers

Telkom said yesterday it would switch from its established equipment suppliers in Europe, such as Sweden’s Ericsson, to emerging manufacturers in China, such as Huawei Technologies and ZTE, as early as next year.

The fixed-line operator would spend R18 billion on equipment over the next three years, chief executive Papi Molotsane said in an interview in Hong Kong. He said Telkom’s capital spending for this year was about R6.5 billion. The Chinese companies might replace other Western suppliers, including Siemens and Cisco Systems, Molotsane said, adding that Telkom had visited Huawei and ZTE plants in Shenzhen, southern China.

"Chinese manufacturers are growing in leaps and bounds. There is a lot of research taking place in China and a lot of skills are being developed there," Molotsane said. "We see a lot of American and European companies establishing bases [there] for software and information technology, so it’s important to be associated with China."

Vodacom Group, Telkom’s cellular joint venture with Britain’s Vodafone Group, might place separate orders with Huawei and ZTE, he added.

Telkom spokesperson Lulu Letlape said the R18 billion capital spending would be spread among suppliers.

Hans Rauman, Ericsson’s vice-president for account management, said the news was a surprise because the two companies had held meetings recently to reconfirm their partnership.

He said Telkom had placed "significant orders" for next year. Ericsson has been supplying Telkom with broadband access and transmission equipment and modems since 1996.

Letlape said Telkom used at least two suppliers for all critical equipment and did not intend to cancel contracts with Ericsson, Cisco Systems and Siemens as they "supply Telkom with various strategic technologies".

Richard Hurst, a telecoms analyst at BMI-TechKnowledge, said the compelling reason for Telkom to shift suppliers would be that Chinese companies offered cost effective solutions on their equipment to the whole of Africa.

In April Telkom announced a R30 billion investment to set up an internet-based network to offer services such as IPTV – television over the internet – and super-fast broadband access as the voice telephony business faced competition from second network operator Neotel.

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Telkom will switch east for equipment suppliers