A match made in hell
In the latest development, the Advertising Standards Authority (ASA) has found in Vodacom’s favour after the cellphone giant brought a complaint against Telkom over the way the latter advertises its fixed-line broadband products.
Vodacom’s ad agency, FCB, on instructions from its client, lodged a “competitor complaint” against Telkom’s ADSL product advertising. Vodacom wanted Telkom to substantiate the claims it made in its ads that its broadband service offered the speeds it advertised. According to the ASA, FCB submitted that “the claims are likely to mislead the reasonable consumer as to the availability of the claimed speeds”.
The ASA ruled that Telkom had to withdraw its claims immediately as it could not substantiate them. “The claims may not be used again in their current format until new substantiation has been submitted [and] evaluated, and a new ruling is made,” the authority said.
Rudolph Muller, founder of broadband activist website MyADSL, says Vodacom’s complaint again illustrates that the company is “ready to take on Telkom in the broadband space and that it is not dancing to its master’s tune any more”.
The ruling is just the latest in the long-fractious relationship between the two operators. The animosity is understood to have been at its worst a few years ago when SBC (now AT&T) of the US had a minority but effective controlling stake in the fixed-line operator. (SBC has since disinvested.) It is well known that Telkom’s SBC-appointed chief operating officer Tom Barry and Knott-Craig did not see eye to eye. Barry, who has since retired, wanted to exercise greater management control over Vodacom.
Knott-Craig says relations with Telkom have since improved, especially since the appointment of Reuben September as acting CEO of the fixed line operator. Vodacom’s ASA complaint suggests the marriage is still on shaky ground, though.
Telkom is reviewing its mobile interests and one option on the table is the sale of Vodacom, probably to the UK’s Vodafone, Vodacom’s other shareholder, in a deal that could be worth as much as R75bn.
Telkom needs a mobile partner with which it can work more closely to develop its strategy of fixed mobile convergence and it may conclude that Vodacom is not that partner. An option would be to buy third mobile player Cell C; another, to be bought out by MTN
Indeed, in a sign that Vodacom is keen to go its own way, Knott-Craig signalled last month that Vodacom would build its own fibre-optic backhaul network, a network that was previously provided solely by Telkom.
Knott-Craig says Telkom takes too long to install the lines it needs and when it does install them, it charges far too much for access to them.
Vodacom will use the planned fibre network to provide bandwidth to back up its rapidly expanding 3G service. But it will also use it to provide fixed-line services to business customers in direct competition with Telkom.
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