More than just fixed lines
Telkom is expected to announce details of its strategy to become a significant player in wireless telecommunications in the next few weeks, as it gears up to compete more aggressively with mobile operators MTN and Vodacom.
Telkom executives say the company will formally announce its plans by the end of the month. Its initial deployment will exclude full mobile services — involving the hand-off (movement of calls) between cellular towers — as the Vodacom shareholders’ agreement with Vodafone specifically prohibits it from providing mobile telephony.
But the company is clearly itching to play in the mobile space. CEO Reuben September says a sale by Telkom of its 50% stake in Vodacom — it is at present in talks with Vodafone, Vodacom’s other shareholder — would free it to become a mobile player. “It is important for us … to take advantage of that and provide what our customers want from us, something that is seamless between fixed and mobile,” he says.
The jury is still out about the strategy, though. Analysts privately express doubt about September and his management team, and the company’s share price has been treading water since January. It’s down nearly 30% year on year.
Telkom wants to build a new network using wideband CDMA, the same third-generation (3G) mobile technology that MTN and Vodacom have deployed to offer wireless voice and broadband. September says Telkom will initially spend about R1,7bn on its 3G network. It is also planning to deploy WiMax, an alternative wireless broadband system.
September says the networks will be built on a “selective basis”. Rather than constructing a national network on the scale of those operated by MTN and Vodacom, Telkom will target areas where it makes financial sense to build. “Our business plan gives us an internal rate of return in excess of 20%. How we expand the network depends on the business case that gets developed as we look at market dynamics and demand.”
Telkom chief of operations Motlatsi Nzeku says base stations will be put up where there has been repeated copper theft and the cost of replacing that copper is no longer justified.
Cable theft is an enormous problem for Telkom. Between March and July this year, repair costs for copper theft stood at R58m. Though down from R87m in the same period last year, it is still very high. The number of cable theft incidents in the period was 4 247, compared with last year’s 6 950.
“We have stabilised the situation through a lot of intervention — alarming our cable routes, and in some areas burying cable,” Nzeku says.
Telkom’s wireless network won’t be constructed only in areas affected by cable theft. They will also be used where corrosion caused by rain and other factors have made network maintenance high.
Metropolitan areas — Gauteng, Durban and Cape Town — will be the primary focus, though some rural areas will also get the technology. The old Dect wireless masts the company erected in the 1990s as part of its obligation to connect millions of new customers in under serviced areas will be retrofitted with 3G and WiMax antennae.
Because the cost of communications equipment has plummeted in recent years, Telkom believes it is now feasible to offer services to these communities profitably. The old Dect towers are connected to the company’s national backhaul network, making it relatively cheap to bring them online using the new technologies.
Telkom has already built a limited WiMax network, but using an older, non mobile version of the technology. These sites will be replaced with mobile WiMax and future deployments will all be mobile, Nzeku says. However, as with the 3G network, there will be no hand-off between base stations unless or until Telkom concludes a deal to dispose of its shareholding in Vodacom.
Telkom wireless – give your views
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