Telkom's aspirant suitor, KT Corporation, says telecoms companies that have emerged from being state-owned entities in a monopolistic environment must innovate as technology changes, or die.
On Friday, Telkom said it was in talks with KT Corporation, which may see the South Korea-based company buy a 20% stake in SA's fixed-line operator. Telkom has been battling with dwindling voice revenue and increasing competition, and has admitted it needs to become more agile.
Analysts welcomed the possible deal, saying it would give the fixed-line operator access to a strong balance sheet and innovative thinking.
In an interview with ITWeb yesterday evening, KT Corporation's senior executive VP Hong-Jin Kim said telecoms companies that have a history of being state-protected monopolies must change how they do business or they will cease to exist.
Rescue plan
Kim was speaking about KT's transformation from a state enterprise into a global ICT company. KT would not field questions about the potential deal with Telkom, which analysts expect to dilute government's current 38% shareholding.
Telkom has about 4.3 million fixed lines in a country with a population of about 50 million, a number that has been declining. Its ADSL offering, at about three-quarters of a million lines, has been growing, but it recently said data revenue was down 6% in the first half of this year compared with 2010.
KT has 19.3 million fixed-line telephony subscribers, a 71.7% market share in a country with about 100% penetration. It also has 7.6 million broadband subscribers, a 52.4% market share and 16.3 million mobile customers.
The Korea-based telco became fully privatised in 2002 and launched IPTV offerings in 2008. Kim says, until 2000, KT had government DNA in its operating model and was not really business focused.
However, says Kim, technology has changed and KT had to keep up with the transition. Government DNA results in companies that are arrogant and bureaucratic and end up “trying to push back the changes”, says Kim.
KT is transforming into a services-orientated telco that aims to own the cloud by providing its customers with the full suite of cloud computing services, not relying on external expertise for items such as hardware and software, says Kim.
Global player
The Korea-based company also aims to be a global ICT player and has completed 11 acquisitions in the past two years, says Kim. He says the company is defending its traditional businesses by transforming existing services and improving efficiencies.
However, it also seeks to grow, as its traditional business is declining, by adding onto its offerings, says Kim. He says the company is adding to its offerings with diverse acquisitions such as credit card and car rental services.
KT has more than 31 000 staff members, the bulk of which are unionised, says Kim. He adds that the company has a good relationship with the unions.
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