Freedom to compete. Those three words appeared in large letters on Telkom CEO Reuben September\u2019s slides at the company\u2019s interim results presentation on Monday. With its divorce from Vodacom imminent, Telkom is on a mission to reinvent itself.<\/p>\n
It\u2019s worth pausing to reflect on the enormous changes that have swept through SA\u2019s telecommunications industry in the past 36 months. Three years ago, SA had one fixed-line operator, three mobile operators (one of them struggling to keep its head above water), and the promise of competition (maybe) from a second national network operator.<\/p>\n
Three years later, the two big mobile operators, Vodacom and MTN, are building their own fixed-line networks to serve their own needs and the needs of the business market and are aggressively pursuing the market for converged data, voice and IT services.<\/p>\n
Second network operator Neotel, though still tiny next to Telkom, has introduced several innovative products that are starting to keep the incumbent on its toes.<\/p>\n
And, thanks to Altech, Internet service providers and other companies with value-added network service licences will soon be able to build their own networks. The effects of this could be profound.<\/p>\n
Even telecom tyke Cell C has turned the corner financially and is taking the fight to its bigger, better-funded rivals.<\/p>\n
The changes sweeping SA\u2019s telecom industry have, however, only just begun. The imminent disposal by Telkom of its 50% stake in Vodacom \u2014 15% to the UK\u2019s Vodafone and the rest to be unbundled to shareholders \u2014 will have a profound impact on the sector.<\/p>\n
The deal will free Telkom to build a mobile network. It will also give it a huge cash pile \u2014 R10,5bn before taxes \u2014 which it can use to build the network (and make acquisitions in fast-growing markets in Africa).<\/p>\n
Telkom has already begun building a fixed-wireless network based on the same 3G technology used by MTN and Vodacom. But under an agreement with Vodafone, it has been prohibited from offering full mobility \u2014 involving the hand-off of calls between base stations. The moment that agreement falls away, some time in the first half of 2009, Telkom will switch on a full mobile network.<\/p>\n
The company is not yet saying how much it will spend on its mobile network but September says it will be \u201corders of magnitude\u201d more than the R1,7bn it had planned to spend over three years on its fixed-wireless network.<\/p>\n
It won\u2019t build a network on the same scale as Vodacom\u2019s and MTN\u2019s, preferring instead to roam on another cellular operator\u2019s network in areas where it doesn\u2019t make financial sense to build infrastructure, but it is already talking aggressively about reducing prices.<\/p>\n
The company hasn\u2019t yet announced tariff plans for voice calls on its wireless network but September has hinted strongly that prices for calls between its own mobile and fixed-line networks will be quite a bit cheaper than calls between its fixed-line network and other mobile network operators. This is because it won\u2019t have to pay the high interconnect fees imposed by MTN and Vodacom.<\/p>\n
It\u2019s in the corporate market where Telkom could take most market share from its cellular rivals. The company counts SA\u2019s biggest corporate companies as clients. By offering bundles of fixed-line and mobile services, it could make life very difficult for MTN and Vodacom.<\/p>\n
The lure of cheap calls between mobiles and land lines could be enough to entice many business customers to sign up to a broader range of Telkom services.<\/p>\n
Its rivals will have to respond by cutting prices, too \u2014 exactly the sort of price competition that SA has been crying out for.<\/p>\n
My bet is that the changes of the past three years in telecoms are going to be eclipsed by what happens in the next three.<\/p>\n