Telkom’s future
Already, its service levels have improved and its customer care is on the up. Now all we need are substantial cuts in the cost of calls and a slashing of its already diminishing fees for internet access and we’ll have a world-class operator with a loyal customer base.
But let’s not get carried away, because there is certainly no love for Telkom in the information technology (IT) industry right now. Beneath the front-office changes, Telkom is making a more serious shift to become an IT player. There has been much discussion locally and abroad about the convergence of computing and telecommunications, and Telkom’s latest bid for Business Connexion is a tangible example of exactly what this means.
If Telkom sticks to its core competence of carrying voice calls, it will soon start to struggle financially, and will probably eventually go bust. Its customers will continue an inexorable migration to cellphones instead of fixed lines, and its revenue and profits will follow them. Already, the figures are startling. Telkom has fewer than 5 million phones installed. Yesterday cellular group MTN announced that 2,2-million users had joined its network in SA since March. It is quite possible that Telkom contributed to MTN’s growth as people relinquished their fixed lines and went cellular instead. Many people endure the monthly rental of R100 or so only because they need a phone for internet access at home. Not for long though, as rivals such as Sentech and Wireless Business Solutions offer ever-lower internet access fees.
Soon the second network phone operators will try to steal Telkom’s most lucrative business customers by promising to give them all the communications services they need and none of the maintenance headaches.
So Telkom has no option but to broaden its services. If it offers consumers affordable voice calls and internet access, video on demand, and even adds some television channels, the future will begin to look a lot brighter. And if it can promise business customers that it can carry their voice and data, get them online, back up and archive their documents, provide software applications over the network, and run the whole complex package for them, Telkom stands to become their key partner.
But it cannot do that alone. The telecoms group simply does not have the skills or the in-depth understanding of a company’s technology needs. An IT group like Business Connexion does, and Telkom needs it. Telkom’s bid of R9 plus a dividend of 25c a share is hostile. It has gone to the shareholders first, and won support from five investors with more than 50% of the shares.
In a previous bid last year Telkom went to the front door, but its bid was not considered worthy of presenting to shareholders, the Business Connexion board said. A little arrogant, perhaps, but also perhaps a little fearful. No successful IT company actively wants to be taken over by Telkom. IT companies will urge the Competition Commission to veto the deal, arguing that Telkom already owns the network backbone that other operators are still legally forced to use, and should not be allowed to dominate the IT services industry too.
The commission has shown its teeth much more effectively in recent months, and would rightly take a close look at any deal that lets Telkom tighten its grip.
If an acquisition is vetoed, Telkom must poach as many skilled technicians as it can to offer the same broad services that buying an IT company would achieve instantly. It’s the only way for Telkom to survive and grow in an increasingly competitive environment.
Inet-Bridge || Discuss this article
Loading ...