Foreign operators expected to bid for Telkom
MERGERS and acquisitions in the technology and telecoms sector will grow so intense in the coming months that Telkom will be taken over by an international operator, the CEO of MTN Network Solutions believes.
There were “plenty of choices” as to which foreign operators will make a play for Telkom, said Mike Brierley, who heads the internet division of Africa’s largest mobile operator.
Last year, MTN itself negotiated to acquire Telkom, giving Brierley an insight into its strengths, weaknesses and its overall attraction as a takeover target.
“I think Telkom will be acquired this year by somebody . I think an international company will buy it,” Brierley said at a technology conference hosted by the online publisher ITWeb.
Telkom CEO Reuben September has previously acknowledged that Telkom is at a crossroads and needs new revenue streams as traditional voice calls become less profitable. The operator proved it was potentially up for sale by opening the negotiations with MTN.
In January, Saudi operator Oger Telecom also bid for a stake in Telkom.
Telkom confirmed it had received a nonbinding expression of interest from Oger on January 22, and said it would consider Oger’s approach along with other options to enhance its position in the industry. Telkom said it would communicate a decision in due course, but has yet to do so.
The scope of the potential deal with MTN was never fully disclosed, nor were the reasons for its failure. It is believed the talks collapsed because MTN realised taking over a bloated organisation and inheriting some legacy systems would be more expensive than rolling out a fresh infrastructure of its own.
MTN is now laying its own fibreoptic networks in a R1,3bn project to boost its voice and data capacity.
Brierley said he expected to buy some backbone capacity from the new fixed-line operator, Neotel, last year, but Neotel could not supply the service.
Brierley also criticised government “interference” in the telecoms sector, particularly by creating uncertainty for consortiums laying undersea cables and insisting that cables landing in SA be majority African-owned.
The ensuing delays could push up the price of bandwidth again, he warned, as capacity on the sole existing cable out of SA neared saturation.
Vodacom Business executive Ermano Quartero said at the conference that Vodacom would soon offer more services to rival Telkom.
Next month it would switch on 120 base stations using WiMax technology to transmit signals to homes and offices. That would dent Telkom’s dominance severely as Vodacom would no longer have to lease the “last mile” of copper cable to reach its customers.
Vodacom would also begin using microwave technology to reach large corporate customers, again ending its reliance on Telkom’s last mile.
Vodacom was forced to buy a 10% stake in another operator, iBurst, to access a licence to use WiMax.
Numerous companies had applied to the Independent Communications Authority of SA (Icasa) for a WiMax licence, but Icasa had “procrastinated” for two years, and significantly retarded progress in the industry, Brierley said.
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