Telecoms dead end
AS THE suckers who pay the bills, SA’s businesses and retail consumers hardly need reminding that the cost of telecommunications in this country remains prohibitively high, despite some recent tariff tinkering.
But it seems that the government has not been listening carefully enough to repeated warnings over several years that excessive broadband and business telecommunications costs are shaping up to be one of the biggest impediments to economic growth.
So, we do not have the luxury of dismissing the latest comparison of international telecommunications prices carried out by Genesis Analytics as old news, even if the results come as no surprise.
Commissioned for the first time by Business Leadership SA in 2005, the latest study update concludes that there is “little evidence that the pricing problem has been solved … despite a great deal of activity in the market”.
According to Genesis’ calculations, the cost of international bandwidth is more than 400% higher than the average of a basket of international markets, many of them at a similar stage of development as SA. Business ADSL costs almost double the average, the same with mobile business packages, and international leased lines are more than 250% higher than average.
This news would not be as bad if there were indications that a concerted effort was being made to rectify matters in the near future. But that is simply not the case. For every step the government takes in the right direction, there is at least one step back, sometimes two.
The latest setback comes as a consequence of talks between Telkom and cellular network operator MTN being called off. That leaves the dominant fixed-line operator, in which the state still has a significant holding, at something of a dead end.
It was never made clear precisely what the two parties were discussing, but it revolved around MTN buying some or all of Telkom’s fixed-line assets. What made little sense was that Telkom’s proposed sale of its 50% in Vodacom was contingent on a deal being hammered out with MTN. That points to a degree of insecurity on Telkom’s part that does not augur well for the bold decisions it must make to survive the inevitable competition in the market.
Telkom seemingly cannot bring itself to let go of its stake in Vodacom because, as the group’s interim results to September showed, its figures look decidedly unhealthy without Vodacom’s contribution as the fixed-line business suffers an inexorable decline. Telkom needs a mobile partner to be able to offer the fixed-mobile-bandwidth packages that are the trend worldwide.
Since it does not work well with Vodacom and its deal with MTN has collapsed, it is starting to run out of options. What is needed now is a bold move to sell out of Vodacom and create fresh and flexible partnerships with other mobile operators, without demanding any ownership of their networks. But fresh and flexible are traits that Telkom lacks.
There are worrying signs that one reason the Telkom-MTN talks failed was that the government, as a dominant shareholder, would not allow any deal that might result in job losses. Coupled with its obstructive stance towards foreign investors wanting to land desperately needed undersea telecommunications cables on SA’s shores, this raises doubts over whether the political will exists to do what is required to reduce telecommunications costs.
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