Vodacom versus Telkom
Telkom has produced another set of impressive results of R 14.47-Billion in operating profit. But the threat of increasing competition in the telecoms space may put a dent in their armour with some of this competition coming from within their ranks, namely Vodacom.
Telkom has a 50% stake in Vodacom, sharing the cellular giant with the international mobile provider Vodafone. Vodacom has also produced sterling results, with R 10.9-Billion in profit and an ever growing subscriber base.
They are however not resting on their laurels and allowing disruptive technologies like mobile messaging or VoIP to eat into their core business. The cellular provider is exploring various other revenue streams, many of which will place it in direct competition with Telkom.
Vodacom’s CEO, Alan Knott-Craig, said yesterday that the lines between fixed and mobile telecoms are fading and that they are looking to expand into areas which could traditionally be considered the fixed line domain.
Knott-Craig said that through their ‘Vodacom Converged Solutions’ they will look to become both a service provider and an infrastructure provider. In the service provider space they will offer services like Managed VPNs, Wireless Access Products and Internet Services.
As an infrastructure provider they will invest in hosting and data centres, repackage fixed connection solutions and even operate municipal digital city networks. Vodacom Converged Solutions are also looking to invest in fiber backbone infrastructure to serve the company’s own capacity needs, but may look at providing services over this fixed infrastructure.
Vodacom has already attracted many big names in the telecoms space, including ex-Telkom executives Wally Beelders and Thami Msimango. These experienced campaigners will bring much needed skills to the traditional mobile and wireless operator.
Word on the street is that Vodacom has also poached high caliber employees from Internet Solutions and, while the cellular provider denies it, many people predict that Steven Hayward, another Telkom executive who resigned recently, may also end up at Vodacom.
Vodacom’s plans indicate that they intend to become a fully fledged telecoms provider, competing directly with the likes of Telkom. This is however nothing new as they have been steadily gnawing away at Telkom’s fixed line voice revenue for years through their mobile telephony services.
Pay-TV
It is a well known fact that larger telecommunication companies are venturing into content provisioning to curb the trend of declining voice revenues, and here Telkom is no exception.
They recently announced that they will be investing around R 7.5-Billion in their latest venture Telkom Media, aiming to break Multichoice’s monopoly in the subscription television arena.
In a surprise move Vodacom announced that they will be joining the pay-TV race as well, but unlike Telkom who will be developing their own service, Vodacom partnered with Multichoice – Telkom’s competitor – to bring a R 139-00 per month DSTV offering to the market.
Vodacom’s large customer base and their extensive distribution channel will help smooth the path for Multichoice to extend their current market penetration to the emerging middle class, something that Telkom said they are aiming to do with their lower end offering.
It will not be easy for Telkom to tackle DSTV in their own back yard – as the telecoms giant is well aware of, being a monopoly provider in the fixed line telecoms space – and having Vodacom supporting your main rival does not help.
But perhaps receiving half the profits from the business that Vodacom has wrestled away from them may help to ease the pain slightly.
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