Do you trust Telkom?
Telkom on Monday announced its biggest ever public deal with a corporate customer, a R1,7bn contract with Absa. The five-year contract covers the provision of a wide area network to connect Absa’s 2 548 sites around South Africa. Hysterical headlines touted this as a stupendously massive contract, but if you work out the average monthly cost to connect each of these sites, it’s not really a big deal… at all.
A back of a matchbox calculation means a estimated monthly cost of R28,3m (over 60 months). This works out to just over R10 000 per month per site. Industry sources say that Absa may very well be paying more than this at present for a solution based on a partly out-dated network.
Obviously the managed services component is excluded from this calculation.
However, a R340m annual jump in revenue thanks to this deal is not something to ignore.
The network will be on a world-standard internet protocol (IP) platform, through Telkom’s VPN (virtual private network) Supreme offering. In many ways this deal demonstrates the power (and reach) of Telkom’s next generation network. It’s one thing for CEO Reuben September to tout the progress of the company’s next generation network build programme, but quite another for a major financial institution to make a call as big as this.
But, realistically, who else could Absa have used? Neotel? No one has a network the size of Telkom’s, despite what others may tell you.
September often speaks about the network being “ubiquitous”, and obviously this is largely due to historical reasons. Who else would be able to connect an Absa site in De Aar, for example?
Surely, other companies put in bids to manage the network. Some could have even gone as far as providing infrastructure in the major metros specifically for Absa. But at some point they would have still been reliant on Telkom for the majority of the links.
John Holdsworth, CEO of privately-held value added network services (VANS) provider Electronic Communications Network echoes this view. “You’ll end up simply being a service provider,” he says matter-of-factly. He explains that any company that did try to offer a solution as extensive as this would be at the mercy of Telkom and would have very little control over the actual network layer.
But, with daily reports of network faults, failures and sometimes cable theft related problems would you trust Telkom with such critical network infrastructure?
In a wide-ranging interview with Moneyweb, a senior executive at one of South Africa’s major telecommunication companies said that Telkom had largely “lost the plot”. This is a company (like every other telecoms entity) that depends critically on Telkom’s network to operate. He adds that Telkom had not planned early enough for the explosion in bandwidth-hungry applications and services.
For example, cellphone networks largely rely on Telkom’s backhaul links to carry 3G data traffic; if the Telkom links are slow or congested, the wireless broadband user won’t experience true 3G speeds. “If they plan today,” he says, “that capacity still won’t come online for at least two years”.
The executive details cases where badly needed capacity on transmission links were going to be installed “next month; next quarter”. This he says, has been happening for months now, work keeps getting pushed out and delayed. This executive pinpoints the problem as directly related to a lack of skills. He paints a dire picture: “Their top engineers have left the country”, and adds the company is left with a handful of experienced staff to handle very complex network-related work.
However, this is only one opinion. Another executive, who uses Telkom extensively to offer converged voice and data services to major listed and unlisted corporate clients, picks Telkom as his first choice (by far) when offered a choice between all possible infrastructure providers (Telkom, Neotel, Vodacom Business or Sentech).
“At least you know what you’re dealing with,” says this exec, displaying a rather-the-devil-you-know mindset. He says that if you’re prepared to pay a team of staff to “just deal with Telkom”, you’d be surprised how quickly they provision lines for you.
The director also explained how Telkom has fault resolution procedures in place, and other infrastructure providers are only starting to design these procedures. At least Telkom knows how to fix problems, they’ve been doing it for years, he says.
With other media salivating at the bizarre prospect of Mvela reaping some sort of synergy between its interest in Absa and Telkom (should that deal go ahead), this deal remains very important for both companies.
Telkom gets a badly needed boost in revenue, and more importantly a vote of confidence in its next generation network (you can be sure it’ll work 24 hours a day to get faults fixed in previously unheard of times); Absa gets a great deal for R1,7bn over five years.
Besides, there’s literally no one else Absa could’ve used, is there?
Moneyweb
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