A blueprint for Telkom’s future
Once upon a time there was a giant telecommunications company. In fact, it wasn’t a telecoms company yet. Or a giant.
It was a division of the Department of Posts and Telecommunications, or simply, the Post Office. Sometime at the end of the last century, it got renamed and was given a separate identity. But consumers still paid their phone bills at the Post Office.
Once this company was separate, it was tasked with becoming a commercial enterprise… which is hard if you’re still a government department. Nonetheless, this company had a monopoly of all the phone lines in the country: how hard could it be to make decent money?
The company starts spending money on improving its network. The "commercial focus" attracts the attention of foreign investors and a stake in the company is sold (eventually these "foreign partners" run for the hills).
A new invention called "the cellphone" during the 1990s, along with the inevitable licence to run a cellular network, means this company can no longer be called a fixed-line operator.
This fable then sees the company list on the local stock exchange and abroad. Times are good.
Fibre optic undersea cables are commissioned and laid to connect the far-flung continent to the rest of the world. The internet arrives and the company launches an internet service provider. After a few fits and starts, a high-speed internet service is launched, using ADSL technology.
All the while, this company grapples with pressure from shareholders to perform, it cuts staff and battles to continually upgrade its aging network (remember, in our tale this company was part of the Post Office).
Government follows developments in the rest of the world and begins the (almost never-ending) process of regulatory review. An act of Parliament with an impressive title is passed.
This company is also the recipient of awards, none of which it particularly wants (think: worst company in the country, that sort of thing). Consumers aren’t happy. Activist websites are started; mock ad campaigns are created (the word "con" rhymes well). But in this land, profits are plenty.
Suddenly, government decides to licence competition. It prescribes and requires an elaborate and complicated operation: "unbundling of the local loop". After all, in this kingdom, a move like this will magically create a competitive market. This will appease the peasants, won’t it?
The company, now under even more pressure, begins making noises about splitting into different operating entities. Numerous reports detail how broadband rollout is faltering, exchanges are overloaded and consumers in well-to-do areas claim they can’t get ADSL connections.
In early 2007, the CEO of what was now a telecoms giant quit without warning. This boss came to the company unexpectedly, from an industry outside of telecoms.
And this is where our tale ends, for now… At this point, the paths between this company and South Africa’s Telkom diverge, for this is not the story of TKG, but rather of Telecom New Zealand.
Don’t believe me? Give or take a few years difference as well as minor details here and there, the company in this tale could also be Australia’s Telstra. Or British Telecom.
This is where those few years difference become important. The events in the recent history of these foreign companies will show us pretty much exactly what will happen at Telkom over the coming years.
Telkom circa 2010
This blueprint may seem radical, but much of this has been discussed at management level at Telkom.
The company will be split. At first into two units, but ideally it will end up as four operating entities.
Telkom
The retail arm of the telcoms giant retains the Telkom name. It’s a name we love to hate, but has tremendous brand equity. Consumers never deal with any other part of the fixed-line operator and the much-bandied about idea of "customer-centricity" is key. The chief of (the new) Telkom’s number one priority is customer service. Employees care about customers and will do anything to help.
This division would be run as:
- Telkom Closer (also a great brand) which handles all the voice business. Existing customers would be migrated to Closer plans with bundled free minutes.
- Telkom Internet: the internet service and broadband provider. Customers will pay one bill to Telkom Internet for broadband. Simple.
Telkom Media falls within this group, but operates as a separate company. Much like BT Vision, IPTV (internet protocol TV) drives revenue and sees this company become a player in the broadcast and content market. It also provides a first-class alternative to Multichoice’s DStv.
T2
The wholesale arm of Telkom relaunches as a separate company, with a new name. The brand recognition of this company is not at all important – this entity deals in bandwidth. T2 is responsible for wholesaling connectivity to business and internet service providers. Telkom Business is reshaped as T2 Business. Costs are stripped down, and efficiency becomes key. This company will compete head to head with Neotel, government’s Infraco as well as tier one ISPs (like Internet Solutions) in some areas.
Network Services
Network Services owns, maintains and develops the access network which links residential consumers and business to the networks of South Africa’s communication providers. The unbundling of the local loop forces the fixed-line operator to spin off this division. Network Services offers customers access to all parts of the local loop as well as backhaul networks (including wholesale line rental). Network Services runs the new next generation network. Network Services installs your phone line and fixes faults but you never contact them, it is contracted by Telkom as a service provider. All the current fixed-line giant’s Colt bakkies and techies now work for Network Services. The South African Internet Exchange (or SAIX) is also housed in this company, along with connections to other parts of the world via undersea cables (or satellites).
TKG Connexion
TKG Connexion (call it what you like) is the company’s consulting and ICT business solution entity. Formed through the somewhat controversial pending acquisition or the takeover of a smaller business (with the integration of overlapping services that exist in the fixed-line company), this company provides business solutions. It competes with others in the market like Dimension Data.
Core group services will obviously continue to be housed in the listed holding company, The Telkom Group.
As for Vodacom? It continues, running at over an arm’s length away from the fixed-line company. Results prove it’s worked very well so far.
Is this scenario hard to imagine?
Here’s a bet I’m willing to take: In two or three years’ time, Telkom (as we now know it) will not exist in its current form. Are you willing to take the counter bet?
If I’m wrong, call me after 2010. I won’t be waiting.
Moneyweb
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