‘SA telecoms costs extremely high’
The Organisation for Economic Co-operation and Development (OECD) recently released its African Economic Outlook report, and it is not particularly complimentary towards the South African telecoms market or Telkom.
“Liberalisation of telecommunications in particular has been long delayed. Telkom, in which government holds a 39 percent direct stake and a further 17 percent through the Public Investment Corporation, still has a monopoly of fixed telecommunications, while just two operators exist with their own networks,” the report states.
“Consequently, the telecommunication costs are extremely high, preventing the development of potentially dynamic service activities, such as call centres.”
The OECD is, however, confident that the new Electronic Communications Act will create a far more competitive environment.
“The 2005 Electronic Communications Act establishes a new regulatory and policy environment that will result in a radical liberalisation of the telecoms sector in the next few years. The prospective opening is already leading to incipient competition for Telkom, which has lost several big contracts in recent months and is experienced declining profits.”
South African Economic Survey
The OECD also released its South Africa Economic Assessment report a few days ago, giving its view on the country’s growth, reforming its services market and realising the country’s employment potential.
Government came under fire for its "misguided universal service requirements" and its monopolised state-owned enterprises. The report states that in the late-1990s Telkom was given a large mandate to roll out new connections.
“Whereas Telkom managed to roll out 2.8 million lines over the consecutive five-year period, about 70 percent of these new lines were disconnected because of non-payment following price increases,” the report states.
“The mobile market has been on the other hand liberalised since 1994 and the industry expanded rapidly – with a market penetration now exceeding 50 percent,” the report states.
Liberalised market is key
The report highlights the value of competition and the need to speed up the process to create a more competitive telecoms market. It highlights the fact that South Africa’s telecommunications industry is characterised by an oligopolistic structure and high state involvement.
“The second national operator, 30% state-owned Neotel, has so far had only limited impact on enhancing competition in the sector, not least because of the barriers to access to Telkom’s infrastructure.”
The report says that while the ADSL broadband market is dominated by Telkom, a wireless and mobile broadband environment is more competitive. “However, the licensing process is slow and cumbersome, which impedes market entry.”
“The dominance of a few well-established players in the sector manifested itself in high prices and monopoly rents. South African telecoms tariffs have been very high by international standards for many years, and progress in bringing them down has been slow.”
“ADSL broadband tariffs are particularly high by international standards, reflecting Telkom’s dominant position in this segment.”
The more competitive mobile market means that consumers benefit from lower rates.
“South African consumers enjoy lower charges for wireless and mobile broadband access, compared, for example, to countries like Australia and Britain, as competition in this segment advanced,” the report points out.
The full report is available on the OECD website (http://www.oecd.org).
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