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Looking back on 2014

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 04 Dec 2014
Job shuffles, buyouts and top-line pressure were some of the issues the ICT sector faced this year.
Job shuffles, buyouts and top-line pressure were some of the issues the ICT sector faced this year.

As the year draws to a close, ITWeb looks back at the highs and lows that characterised 2014, as well as issues that will linger in the ICT sector in the year, or years, to come.

In alphabetical order, here are our 10 most memorable business and financial events of the year:

1. Digital TV was regularly in the headlines this year, but for all the wrong reasons. The stalled process seemingly became the object of a power struggle between communications minister Faith Muthambi and telecommunications and postal services minister Siyabonga Cwele. Yet, even as Muthambi looks set to take control of the project - ongoing since 2006 - the costs of migration are spiralling out of control. The much-delayed move to digital television will cost the country at least another R1.9 billion to subsidise set-top boxes. Even more expenses are on the horizon over the next three years, as there is no clear figure from government as to how much this move has cost so far. Meanwhile, it is increasingly clear SA will not meet the mid-2015 deadline to shift off analogue.

2. Facebook's big move of the year was to buy messaging service WhatsApp for $22 billion, after which WhatsApp said it would also enable free calling. This placed more pressure on operators that are already crying foul that over-the-top (OTT) players are eating their lunch. Most local mobile operators have come out against OTT players, seeing them as cannibalising their networks for profit. So far, only Cell C has accepted that OTT is inevitable, moving to embrace the communication evolution rather than push back. Vodacom and Telkom have chosen to portray it as a threat to their core business. MTN has said OTT players cannot have a free ride, but seemingly embraced the concept of apps that pay their own way.

3. Consolidation continued, with Internet Solutions (IS) buying the rest of MWeb's business unit - apart from WiFi - as well as its network, and will provide a backbone to MWeb Consumer, which is all that will remain of MWeb's offerings. MWeb's WiFi entity will be merged with IS' AlwaysOn WiFi unit to create WirelessCo, which commentators expect to be a "game-changer". WirelessCo will be 51% owned by Dimension Data, with the balance owned by MultiChoice, which is contributing MWeb's assets.

4. As companies sought to keep an even tighter lid on costs, job cuts were the order of the day this year, with several telecoms operators retrenching. Entities that cut jobs include Cell C, MTN and Telkom. MTN wants to trim its workforce by about 900 people, while Telkom aims to remove as many as 2 500 managerial slots, and Cell C has said as many as 190 of its 1 458 staff members may face retrenchment. The telcos are not alone in their moves, as business process outsourcing firm Inter-Active Technologies retrenched 4% of its staff because of "extreme pressure" on SA's economy. The Technology Innovation Agency also wants to cull a third of its staff to cut down on administrative costs, although clarity on this will likely only come in March.

5. Mobile operators had another challenge slung their way when the Independent Communications Authority of SA decreed, towards the end of September, that mobile termination rates would remain at 20c until next September, after which they would drop to 16c, and then 13c in the final year to September 2017. Cell C and Telkom Mobile will now be able to charge the duopoly 31c to terminate calls on their networks, which then drops to 24c and then 19c at the end of the glide path. The new rates were a boon for Telkom, adding R321 million to its profit line, but a curse for Vodacom, which saw the new rates strip R1 billion off its top line, and R600 million from its profitability. Mobile operators have been seeking new revenue streams as voice income continues to fall, a move that has not been mitigated by growing data use as this is at lower margins.

6. One company that did not survive 2014 was Nashua Mobile, which hived off its customer base and closed its physical outlets. Parent company Reunert sold the Cell C customer base to Autopage for a maximum amount of R91.5 million, in a move that followed the sale of the MTN and Vodacom subscriber bases to the cellphone operators for R2.26 billion. However, the deal was not without incident, as Altech Autopage had a few issues migrating 55 000 Cell C customers to its system when about 3 000 subscribers - or 5.45% - were soft-locked because their accounts reflected as being in arrears. MTN also had teething issues as a number of customers it migrated from Nashua Mobile were inadvertently disconnected on 25 November.

7. Pinnacle Holdings took a hammering this year when it announced executive Takalani Tshivhase had been arrested on charges of bribery. The news sent its share spiralling down to about half its value, and prompted a Financial Services Board (FSB) probe because shareholders were only told 20 days after the fact. While the FSB's investigation was later dropped, and charges against Tshivhase withdrawn, the company continued to take flack from shareholders this year as, in October, shareholders voted against its remuneration policy, and chairperson Daphne Mashile-Nkosi stepped down from the company.

8. As opposition to the South African National Roads Agency's (Sanral's) electronic highways continues to mount, ITWeb this year revealed the agency's project will be about R5 billion in the red by December next year. This comes as it racks up debt of at least R200 million a month on the Gauteng Freeway Improvement Project. In the first four months of the controversial e-highway system going live, Sanral effectively wrote off R1.123 billion because the overdue amount was not recognised as the agency did not anticipate being able to collect it.

9. Telkom has also been busy trying to bulk up its IT capability, as it seeks to offer end-users digital homes and offices. In May, it put a R2.67 billion bid on the table for Business Connexion (BCX), the second time it has tried to buy the listed IT company. The deal is still going through regulatory approvals - as is Vodacom's R7 billion offer for Neotel announced about a year ago - but BCX and Telkom are confident it will fly this time because the industry has changed. Buying BCX will give Telkom access to IT skills it does not have and enable it to take advantage of convergence.

10. Top-level shuffles also characterised this year, with Naspers stalwart Koos Bekker being among the first to announce his departure. Bekker has spent the best part of this year scouring the globe for Naspers' next big investment in the ICT space. He will return as chairman of the listed company next year. Others to change jobs included Telkom's former CFO Jacques Schindeh"utte, who the telco says "decided" to retire in August, bringing to an end a disciplinary process. The former CFO's departure left more questions than answers, as the telco never clarified what charges he faced, nor quantified how much it would pay out to satisfy the full benefit condition of his retirement. MTN also saw top-level changes, as Microsoft's former Africa GM Mteto Nyati joined the company, as did Cisco MD Alpheus Mangale, while MTN SA chief enterprise officer Kanagaratnam "Lambo" Lambotharan left. In addition, Internet Solutions CIO Prenesh Padayachee moved to Telkom.

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