Taking on Telkom
Mike Rwayitare, the Rwandan-born billionaire and founder of pan-African cellphone group Telecel International, will invest billions of rand in a new venture to tackle Telkom and Multichoice head-on in telecommunications and pay-TV.
Rwayitare’s company, Miko Investment Holdings, has acquired a 66% stake in Goal Technology Solutions (GTS), a company that wants to use municipal electricity infrastructure to deliver a “triple play” of broadband, TV programming and voice telephony to as many as 1,5m SA homes by 2010.
GTS, which started life as part of Grintek Telecom before being spun off in 2004, will use powerline communication (PLC) technology to bypass Telkom’s so-called “last mile” of cables that connect consumers to its network.
The company is promising price competition with the incumbents. “We have to be 25% cheaper that the comparative offerings today,” says GTS CEO Adrian Maguire. “We have to deliver more than what is available to consumers today and we have to do it more cost-effectively.”
GTS is taking advantage of the new Electronic Communications Act, which allows municipalities to use their communications infrastructure to provide services to consumers in competition with Telkom. Macquire believes most municipalities will partner private companies, such as his, to provide these services to their residents.
Rwayitare, who has extensive experience in building telecoms networks across Africa with Telecel, has been appointed chairman of GTS.
In March 2000, Rwayitare sold 80% of Telecel, which at the time operated in GSM licenses in 11 territories in Africa, to Egypt’s Orascom Telecom for US$413m.
He has since made investments in hotels – he owns the Hotel des Mille Collines in Rwanda, and the Mont Rochelle Hotel & Mountain Vineyards in Franschoek. Rwayitare, who is now South African, says his plan was to retire at Mont Rochelle but he admits that he loves a challenge and says there are big opportunities in the SA market.
He will provide the bulk of the funding that GTS needs.
“We plan to spend billions of rand,” says Maguire. HE says the company won’t need to go to the market to raise money.
GTS has applied for a subscription TV license from the Independent Communications Authority of SA (Icasa) and hopes this will be awarded to it by mid-2007 – at the latest. Meanwhile, the company is in talks with a number of municipalities. It is already running test networks in parts of Durban and Tshwane, involving about 1 000 homes.
Macguire says that when GTS begins offering services, it will deliver guaranteed minimum access speeds to subscribers of 90 Mbit/s. That’s 22 times faster than Telkom’s fastest broadband offering (4 Mbit/s) and is enough to deliver multiple high-definition television channels simultaneously while still providing broadband and telephony.
Macguire says it’s logical for municipalities to play a central role in creating competition in the telecom industry.
Their electricity infrastructure connects 80-90% of homes in SA and obviates the need for extensive investment in new wireless or wireline access networks. The municipalities also have extensive fibre infrastructure and the high sites, such as water towers, necessary to build a backhaul network, Macguire says.
Though there were initially doubts about the feasibility of PLC technology, Macguire says initial challenges have been resolved. “PLC has been designed to work in wild environments,” he says. “It does not rely on the quality of the network. It’s stable and the bandwidth can be delivered. We are so confident [in the technology] that we will cover 100% of the cost of the networks. We won’t ask the municipalities to invest any money.”
About 18 countries have PLC networks so far. Some of the biggest are in Tasmania in Australia and in Spain.
Macguire hopes that consumers will see value in having one company supplying them with pay-TV, Internet and telephony on one network. He says that soon companies that can’t offer their subscribers this sort of tripl-play bundle won’t be competitive.
Eric Nhlapo, Icasa’s former GM for broadcasting, has been hired to head GTV, GTS’s pay-TV arm. Gtv won’t emulate the Multichoice model. Rather than providing 60 or more channels to consumers, like DSTV does, the company will broadcast between 3 and 10 “high quality” channels. “We’d rather pay more money for quality content and have most of our channels watched,” Macguire says. “We will have pay-per-view channel and a video-on-demand facility, too.”
Additional services that GTS intends to offer include Internet gaming and video surveillance systems. People will be able to monitor, using video streaming, what’s happening in the streets in their neighbourhood from their PCs or TVs.
GTS is hiring. It has started an intern programme which it plans to grow. The company, which has only 35 employees, needs to build its workforce quickly, Macguire says.
He doesn’t envisage GTS building a Telkom-sized network of technicians, however. He says GTS staff won’t need access to people’s homes. Consumers will buy a device that they simply plug into a wall socket. This device will automatically configure itself with the network. GTS will then specify which service should be available to that customer – whether they subscribe to everything or just one component, such as Internet access.
Because GTS won’t need access to people’s homes, Macguire Is confident that the company will be able to sign up between 1,1m and 1,5m customers by 2010.
Rwayitare says GTS wants to “prepare people to watch the 2010 soccer World Cup in high-definition.”
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