Telkom to drive prices down?
Telkom has often come under fire for its high fixed-line broadband prices and monopolistic practices, but when it comes to mobile services it is the new market entrant rather than the incumbent.
Business Day recently reported that Telkom was well aware that its “relatively high prices for voice and data calls were inflating the day-to-day running costs for business clients…” Copper theft posed another problem which meant that many current fixed line customers moved their business to the mobile operators.
Telkom is investing R1.7billion in its own wireless telephony and mobile broadband network. Telkom will be offering both broadband data services and semi-mobile telephony services over its W-CDMA (3G/HSDPA) network.
Telkom is already trialing this service with customers in Gauteng where it has 38 base stations covering many parts of the province. The company is planning to erect another 200 base stations over the next few months.
The new network is built in partnership with Chinese company Huawei, the same provider used by WBS/Vodacom for part of its WiMax network.
End users are expected to be furnished with a Huawei B970 modem, similar to the wireless gateway recently launched by MTN. This Huawei B970 comes standard with four Ethernet ports, an analogue phone port and a place for an external antenna. This device is a perfect companion for a home or small office.
Aggressive pricing
Early speculation suggests that Telkom will compete aggressively on price when it comes to its semi-mobile data and voice services, undercutting the incumbent cellular operators.
Telkom plans to provide small companies with more affordable data packages for high-speed internet access. These packages may include 3G/HSDPA data packages of up to 10GB per month with prices far below the current Vodacom and MTN pricing.
If this speculation is indeed accurate Vodacom and MTN will be forced to act if they want to continue growing their market share in the SMME market where Telkom has coverage.
It is not unlikely that Telkom’s entrance into the mobile/wireless data market, coupled with Neotel’s growing coverage and marketing campaigns, will spark a price war last experienced earlier this year when Vodacom cut its mobile data prices by up to 65%.
Telkom’s current Vodacom shareholder agreement prohibits it from providing fully mobile services, something which may change if it sells part of its stake to Vodafone. If Telkom is allowed to provide fully mobile voice and data services we may see a fourth mobile operator which is willing to compete more aggressively on price.
Competition in the cellular market may therefore come from an unlikely source in the forum of Telkom – doing consumers a favour by breaking the current trend where Vodacom, MTN and Cell C price many of their products at very similar rates to avoid continual price wars.
Telkom is expected to launch its fixed voice and fixed-mobile data services this month.
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