Vodacom vs Telkom
Vodacom has hired two of Telkom’s top executives in the past couple of weeks. Former Telkom chief sales & marketing officer Wally Beelders has been appointed commercial director of a new Vodacom business that will house its Internet service provider (ISP), virtual private networking and WiMax wireless networking interests; and former Telkom chief technical officer Thami Msimango has been appointed chief operating officer of the new business. The appointments come just months after Vodacom hired former Telkom managing executive Minnie Maharaj to manage international wholesale services.
Though Telkom owns 50% of Vodacom, it does not have management control and relations between the two groups have historically been rocky — they reached a low point a few years ago when SBC of the US and Telekom Malaysia were still shareholders in Telkom. SBC’s Tom Barry, who was also Telkom’s chief operating officer, made it clear he wanted greater control over Vodacom.
Now, in a move that could reignite tensions, Vodacom appears to be gutting Telkom of its best talent. What is Knott-Craig, one of SA’s wiliest businessmen, up to? In announcing the Telkom hires last week, Knott-Craig said the appointments were “highly strategic” for Vodacom as it tried to “seize opportunities presented by convergence”. By convergence, Knott-Craig means the converging technology, policy and regulatory environment created by the Electronic Communications Act, new legislation designed to spur growth in the sector.
Vodacom has been scouting the SA market — unsuccessfully, so far — for an ISP to buy. It has already acquired a 10% stake in iBurst, a wireless broadband operator. Knott-Craig said last year that he wanted to take management control of the company, whose MD, coincidentally, is his son.
iBurst will give Vodacom the licence it needs to provide WiMax services. WiMax is a much-hyped wireless technology touted by vendors and operators as an alternative to fixed lines in providing broadband and voice telephony.
Knott-Craig is keen on using the changing policy and regulatory environment — the Electronic Communications Act allows cellphone operators to provide a wider range of services — to expand Vodacom’s business in SA. Vodacom has not been able to expand as aggressively in Africa as rival MTN, partly because of restrictions imposed on it by its other shareholder, UK-based Vodafone. Also, the market for cellular telephony in SA, Vodacom’s biggest market, is maturing, which means the group needs to look for business opportunities elsewhere to maintain growth.
Vodacom’s new business, which hasn’t been named yet, will fight for customers with Telkom, as well as communications services companies such as MTN Network Solutions, Internet Solutions and Verizon Business (formerly UUNet). Both IS and Verizon are hoping to get WiMax licences this year; Telkom already has one and will launch commercial services using the technology soon. But Vodacom’s move into WiMax, as well as virtual private networks and Internet service provision, could again strain relations between it and Telkom.
The mobile operators already dwarf Telkom in the voice market. Unless Telkom lifts its game by cutting its prices and improving its poor customer service, it could quickly find itself marginalised in other areas, too. Vodacom’s move comes at a particularly bad time for Telkom, which is without a permanent CEO after the unceremonious departure two weeks ago of Papi Molotsane.
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