Openserve to separate from Telkom

Telkom has announced that it will legally and structurally separate its wholesale and networks division Openserve from the rest of the business on 1 September 2022.

Openserve operates Telkom’s over 160,000km national fibre network, and its old copper telephone lines.

Telkom first launched Openserve on 13 October 2015 as the functional separation of its wholesale and retail operations.

This was part of a settlement agreement between Telkom and the Competition Commission announced on 17 June 2013.

Under the deal, Telkom would pay a R200-million fine for anti-competitive behaviour between 1999 and 2004, and 2005–2009, and functionally separate its wholesale and retail divisions.

The Competition Commission said that Telkom made admissions to excessive pricing and engaging in “margin squeezing” against competitors.

Telkom has now announced it would extend this functional separation to a structural and legal separation of the divisions.

“We have been on a journey to transform and unlock value in the Group by separating the operating businesses to become standalone entities, which started with BCX and subsequently Gyro, which now operate as separate legal entities wholly owned by Telkom SOC,” said Telkom CEO Serame Taukobong.

“Openserve follows suit as a wholly owned subsidiary of the Telkom Group, which will promote and drive autonomous ability and market visibility.”

Openserve CEO Althon Beukes said the separation positions Openserve to respond to the ever-changing regulatory and competitive environment.

It also enables them to focus on their growth ambitions, said Beukes.

He said that the significant strides Openserve has made since 2015 are already evident in the announcement that Openserve will serve as the landing station partner for Google’s Equiano submarine cable system.

Equiano will run from western Europe, along the west coast of Africa, to Openserve’s facilities in Melkbosstrand in the Western Cape.

Telkom announced in a trading update on Tuesday that Openserve’s last-mile fibre network passes over 890,000 homes in South Africa, with a connectivity rate of 46.6%.

With over 414,847 customers connected to its fibre network, Openserve is once again neck-and-neck with South Africa’s upstart fibre leader Vumatel.

Vumatel said in July that it had about 450,000 customers connected to its fibre network.

At the same time, MTN is making overtures to buy Telkom.

The two companies announced on 15 July that MTN is in early discussions to buy Telkom’s entire issued share capital in exchange for shares or a combination of cash and shares.

Industry experts have said that such a deal would have to be carefully structured, as any acquisition that includes Telkom’s spectrum would raise regulatory red flags.

However, they also believe that MTN isn’t after Telkom’s spectrum this time, but its extensive fibre assets.

This would be to compete with a potential merger of Vodacom’s fibre network with Vumatel, which is currently before South Africa’s regulators.


Now read: Fibre price war — Openserve 100Mbps lags despite shaking things up

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Openserve to separate from Telkom