Why Telkom is fighting against Vodacom and MTN getting more spectrum

Telkom has been very vocal in its opposition to Vodacom and MTN getting more spectrum. This, research firm Primaresearch said, is needed to keep its competitive price advantage.

In a recent eNCA interview, Telkom’s group executive of regulatory affairs Siyabonga Mahlangu said it is ICASA’s duty to weaken Vodacom and MTN.

According to Mahlangu, policies of the past entrenched a duopolistic market structure which gave Vodacom and MTN a big advantage over later entrants like Telkom and Cell C.

“The early mover advantage and supportive policies have made it difficult for competition to happen in the mobile sector,” said Mahlangu.

He said the structure of the market should be changed and the planned spectrum auction is a good place to start.

“ICASA must make sure its spectrum auction rules and the design of the auction favours competition and weakens the duopoly [Vodacom and MTN],” said Mahlangu.

This spectrum fight may seem strange, as Telkom is roaming on Vodacom’s network to provide its subscribers with country-wide 4G coverage.

To understand Telkom’s opposition to Vodacom and MTN getting more spectrum, one has to look at the business fundamentals in the mobile market.

Price cuts from Vodacom and MTN will hurt Telkom

A recent report by Primaresearch titled “Telkom – The Growth Conundrum” explained the company is facing big challenges.

Telkom could previously achieve growth by simply being the price leader and filling up its empty network.

This has now changed. Telkom growth going forward will necessitate capacity-related investments over and above the capex required to build the mobile network.

“We believe that Telkom is under pressure to scale the mobile business rapidly to secure itself as a sustainable mobile operator prior to the incumbents securing additional spectrum,” Primaresearch said.

Once Vodacom and MTN receive spectrum, they will be in a better position to compete with Telkom on pricing.

Primaresearch foresees a period of intense mobile capex, possibly at the expense of the fixed-line business.

This is needed as Telkom attempts to scale its network and onboard roaming traffic in support of margin.

Telkom is already under pressure, as it is prioritizing mobile at a time when the sector is under significant pressure to reduce pricing – particularly for mobile data.

The company has to get whatever advantage it can to help the business, which includes fighting against Vodacom and MTN’s acquisition of additional spectrum.

Telkom using jobs cuts to influence spectrum auction

Communication Workers Union president Clyde Mervin recently said Telkom’s planned job cuts are all about trying to influence the upcoming spectrum auction.

Telkom is planning to retrench as many as 6,000 employees this year, blaming the current regulatory environment and having to compete “in a duopolistic mobile market”.

The company said it has invested in new technologies and revenue streams, particularly in its mobile business, which has taken its toll on profitability.

Telkom also blamed difficult economic conditions, declining voice revenues, and having to reposition itself amid fundamental changes within the telecommunications industry.

Mervin, however, dismissed these excuses. He told CNBC Africa the real reason behind the threat of job cuts was to “bulldoze” the spectrum auction.

He said Telkom is using the planned job cuts as a negotiation tool to influence the spectrum auction because the company is currently not guaranteed to receive additional spectrum.

According to Mervin, the documentation related to the planned job cuts clearly references spectrum and the regulatory environment.

Now read: Telkom is using jobs cuts to influence spectrum auction – CWU

Latest news

Partner Content

Show comments

Recommended

Share this article
Why Telkom is fighting against Vodacom and MTN getting more spectrum