{"id":51887,"date":"2012-06-06T17:06:16","date_gmt":"2012-06-06T15:06:16","guid":{"rendered":"http:\/\/mybroadband.co.za\/news\/?p=51887"},"modified":"2012-06-06T17:37:05","modified_gmt":"2012-06-06T15:37:05","slug":"telkom-where-did-it-all-go-wrong","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/columns\/51887-telkom-where-did-it-all-go-wrong.html","title":{"rendered":"Telkom: where did it all go wrong?"},"content":{"rendered":"

Things aren\u2019t looking too good for Telkom<\/a>. Not only is its share price plumetting, it\u2019s also facing a huge fine from the Competition Tribunal, and a 2,392% increase in its spectrum licensing fees.<\/p>\n

The Competition Commission asked the Tribunal to fine Telkom R1.2-billion if it was found guilty of anti-competitive behaviour.<\/p>\n

A new Administrative Incentive Pricing scheme introduced by the Independent Communications Authority of South Africa (ICASA)<\/a> could also result in Telkom paying R822-million more per year for its wireless spectrum than before.<\/p>\n

Telkom further said that its recently launched consumer mobile offering, 8ta<\/a>, is only expected to break even in 2014.<\/p>\n

On top of this the company faces a plague of copper theft, for which government recently put new legislation in place.<\/p>\n

To crown it all, Cabinet has rejected the proposed sale of a 20% stake in Telkom to Korea Telecom<\/a> which means that the much needed cash injection which Telkom was looking for will not happen.<\/p>\n

All things considered, it shouldn\u2019t come as a surprise that Telkom revised its expected earnings downward<\/a> on Monday. Except it\u2019s the second time Telkom has lowered its expected earnings for the same period.<\/p>\n

\"Dina

Dina Pule, Minister of Communications<\/p><\/div>\n

How did this happen?<\/h3>\n

A pertinent question to ask at this point is how South Africa\u2019s telecommunications giant has landed up in this position.<\/p>\n

An even more pertinent question, is why the SA government still holds a controlling stake in Telkom.<\/p>\n

Government directly controls 39.8% of Telkom\u2019s shares and an additional 10.9% through the Public Investment Corporation, which is an investment company wholly owned by the government.<\/p>\n

\"Pinky

Nombulelo "Pinky" Moholi, Telkom CEO<\/p><\/div>\n

At the risk of oversimplifying: Telkom\u2019s problems begin and end with government\u2019s involvement in the telecommunications sector.<\/p>\n

By way of example, let\u2019s look back at the time that government allowed the Thintana Communications consortium to plunder Telkom.<\/p>\n

Thintana, a consortium made up of US telecoms group SBC and Telekom Malaysia, bought a 30% stake of Telkom in 1997.<\/p>\n

The powerful position enjoyed by Thintana until 2002 was described in an\u00a0article published during 2007 by a US academic journal, which was co-authored by Willie Currie, a counsellor at ICASA, and Robert Horwitz, a member of the department of communication at the University of California in San Diego.<\/p>\n

Currie and Horwitz describe how South Africa\u2019s new democratic government had worthy intentions: to roll out telephone service to the previously disadvantaged and establish an independent regulator to oversee the reform.<\/p>\n

However, according to the article their plans were defeated by a lack of trust in democratic structures outside of the ANC\u2019s immediate control and the ANC\u2019s inability to control powerful international players involved in privatisation.<\/p>\n

\"Lyndall

Lyndall Shope-Mafole<\/p><\/div>\n

Add to this the attempts of the Department and Ministry of Communications to block new infrastructure players and international cable systems such as Seacom and EASSy, and government\u2019s conflict of interest is made apparent by how hard it fought to prevent the telecommunications industry from offering the services Telkom does.<\/p>\n

In a landmark case against ICASA in 2008, Altech eventually won the right to roll out its own telecoms services, paving the way for others to get licenses to do the same.<\/p>\n

Former director-general of the Department of Communications, Lyndall Shope-Mafole was even quoted as saying: \u201cWhy were we protecting Telkom?<\/a> [It was] so that we could get big value for it because it was going [public on the stock market]. It had to do with bringing investors into a company that is South African.\u201d<\/p>\n

Judge, jury, and executioner<\/h3>\n

Not only does the South African government set the country\u2019s information and communication technology policies and legislation, it also controls the regulator (ICASA) and the biggest fixed-line operator (Telkom).<\/p>\n

Broadband Infraco, a terrestrial backhaul network provider, and Sentech, a wireless signal distributor, are also state-owned enterprises (SOEs).<\/p>\n

This obvious conflict of interest has been brought up time and again when government dragged its heels in liberating South Africans from Telkom\u2019s monopoly.<\/p>\n

Industry and analysts cautioned government and Telkom of the consequences should they continue to run the operator the way in which it was, but the warnings were ignored.<\/p>\n

We told you so<\/h3>\n

Despite the cries to break Telkom\u2019s monopoly, to invest in its network instead of paying special dividends, to give competitors access to Telkom\u2019s last mile copper infrastructure\u2026 despite all this, here we sit.<\/p>\n

All of the progress made in South Africa\u2019s telecommunications sector has been fought for tooth and nail by the industry itself. Any advances that were made have been in spite of government\u2019s involvement rather than because of it.<\/p>\n

In 2003 the ITU listed South Africa as the third highest drop in global ranking on its Digital Access Index when we slipped six places from 30 to 36 between 1998 and 2002.<\/p>\n

More recently South Africa ranked 97th on the 2010 ITU ICT Development Index, down from 94th in 2008.<\/p>\n

It\u2019s way past time for government to admit that it has failed to achieve its \u201cdevelopmental goal\u201d of reducing the cost to communicate and increasing broadband access through its SOEs and parastatals like Telkom.<\/p>\n

Related articles<\/h3>\n

Terms of Telkom shareholding sale to Thintana put both \u2018above the law\u2019<\/strong><\/a><\/p>\n

How Telkom tried to hijack the Internet<\/strong><\/a><\/p>\n

Minister adds four years to Telkom\u2019s monopoly<\/strong><\/a><\/p>\n

Altech court victory<\/strong><\/a><\/p>\n

Altech win stands, as minister rests case<\/strong><\/a><\/p>\n

R922 million Telkom\u2019s new spectrum bill?<\/strong><\/a><\/p>\n

Will the DoC ever get its act together?<\/strong><\/a><\/p>\n

Please don\u2019t mess this one up as well, DoC<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The South African government helped make Telkom\u2019s bed, maybe it should sleep in it too<\/p>\n","protected":false},"author":15,"featured_media":37893,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[21],"tags":[1147,237,1023,35,533,2136,1663,3460,2760,109],"class_list":["post-51887","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-columns","tag-broadband-infraco","tag-department-of-communications","tag-doc","tag-headline","tag-icasa","tag-independent-communications-authority-of-south-africa","tag-ivy-matsepe-casaburri","tag-lyndall-shope-mafole","tag-sentech","tag-telkom"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/51887"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=51887"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/51887\/revisions"}],"predecessor-version":[{"id":51983,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/51887\/revisions\/51983"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/37893"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=51887"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=51887"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=51887"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}