Telkom limbers up to jump digital divide and cross borders into Africa
Telkom has disconnected nearly 1-million telephone lines of defaulting customers — it had more than 5,5-million customers in 2000, which has shrunk to 4,7-million now — and its call charges continue to be among the world’s highest.
In 2004 the company reported that its customer base had been “adversely impacted by migration to mobile services and lower connections, as well as high disconnections due to nonpayment”.
To retain customers and attract new ones, Telkom CEO Papi Molotsane says its new strategy is to become a market leader in broadband technology and to provide a “triple play” of voice-based communication, internet and pay television.
In addition, Telkom will venture into other parts of Africa where it will offer both fixed-line and cellphone services.
According to the African Telecommunications Union, close to 3 million people in Africa are on waiting lists for a fixed-line telephone. The organisation, which promotes the development of information and communications technology in Africa, says there is demand to support an additional 60-million lines, particularly in remote areas.
Telkom has identified Angola, Kenya, the Democratic Republic of Congo and Nigeria as pilot markets for its African expansion strategy.
Despite its diminishing land-line customer base at home, Telkom has a net debt-to-equity ratio of 44% compared with last year’s 54%, and says it is more than ready to venture into the African fixed-line and cellphone markets.
The International Telecommunications Union says Africa’s telecommunications markets are the fastest growing in the world and very low levels of penetration make it the most attractive investment arena in the world.
However, most of the growth comes from cellphone subscribers, with 30-million African consumers signing up between 1997 and 2001.
The Tokyo-based telecommunications research group Global Information Incorporated says fewer than 1% of Angolans have access to a fixed-line phone while the market penetration for cellphones is about 4%. In Zambia only 90 000 of a population of more than 11-million have access to telephones.
Botswana, Namibia, Madagascar, Malawi, Lesotho and Mozambique also have low fixed-line connectivity but Nigeria, with a population of more than 120-million, offers the most lucrative market on the continent.
The research group says fixed line “teledensity” in Africa is 3%, while cellphone penetration is 8%.
Alternative technologies such as satellite, wireless and cellular are making connectivity in Africa far easier than cable-based services, suggesting that fixed-line access may become outdated on the continent. Follow-on services such as internet access are likely to focus on cellphones rather than fixed-line technology too.
Analysts maintain the success of Telkom’s venture into Africa will depend largely on its pricing model.
A new survey by the US-based telecommunications consulting firm NUS Consulting says telecommunications charges for both fixed line and cellphone calls in SA continue to hamper efforts by South African companies to compete in the world’s major markets.
Charges in SA remain high, despite competition in the cellular sector and Telkom reducing its charges for national and local calls last year. According to the survey, a fixed-line three-minute national call (made over a distance of 320km) costs just more than R2 while a similar call costs less than 50c in Sweden, which has the lowest call rate among the 14 countries surveyed. A three-minute national call on a cellphone costs nearly R4,50 here compared with 95c in the US.
According to NUS, SA’s fixed line charges for local calls are the highest after Belgium and the highest after the US for international calls.
But Telkom still maintains that its prices are competitive.
Spokeswoman Lulu Letlape says Telkom’s call charges are used to subsidise the cost of the access network, which is a “deliberate strategy to ensure the barrier to entry is kept as low as possible”.
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