Good week for telecoms
The South African telecommunications sector has had a good week. Events of the last seven days are going to shape the future of our communications industry and it’s been great to watch.
Most people within the industry were excited by the ruling of the High Court to deny the Minister of Communications leave to appeal against the ruling that VANS license holders should be allowed to self provision. This means that these operators will be able to deploy their own telecommunications infrastructure. Under the previous licensing framework, VANS would have had to rely on other providers.
Frost & Sullivan believes that the reason the Minister appealed the initial judgment might be due to concerns that if the market is liberalised it will be glutted by a plethora of service providers vying for a piece of the pie. South Africa’s regulatory framework does not permit this however, as there are obligations that license holders must prove they can fulfill before infrastructure is rolled out. The most demanding of these is that nationwide coverage has to be ensured. Most operators are simply unable to meet this requirement due to the significant cost it would involve. An investment close to R1 billion could be needed for an exercise of this nature, which narrows the number of operators with the potential to build their own infrastructure.
The telecommunications industry is however now set for full liberalisation with the ability to facilitate healthy competition and promote the provision of world class services.
Another fantastic announcement in the telecommunications industry this week is Vodafone’s acquisition of an additional 15% stake in Vodacom. Telkom’s remaining 35% stake in Vodacom will also be unbundled and Vodacom will be listed on the main board of the JSE. There are a number of benefits arising out of this announcement.
Vodacom stands to gain from a changed shareholding structure which should lead to the operator experiencing quicker decision making processes. The former CEO, Alan Knott-Craig, had expressed his concern with the lack of a clear path forward for the operator – mainly due to shareholder disagreements. The new structure should solve this and allow the cellular operator to increase its revenue earning potential. This will of course generate even greater value for Vodacom’s shareholders.
Telkom’s divestiture of its entire stake in Vodacom has also unlocked value for its own shareholders through the payment of a special dividend. In addition, Telkom will also be able to compete more aggressively in the converged telecommunications space.
Frost & Sullivan believes that the consumer stands to gain as well. Vodacom’s more integrated status with the Vodafone group should see the introduction of new services to the market. An example of this could well be Safaricom’s M-Peso services (a mobile money transfer solution) that Vodacom Tanzania has already introduced.
These developments are not only good news for the telecommunications market, but should be well received by the entire South African business sector. In this tough period for all commercial concerns, this is positive news that should ultimately lead to lower telecommunications costs and new services to aid communications. A liberalised market that encourages greater choice and better services is what all South Africans now have to look forward to.
Moneyweb
Loading ...