Telkom, Thintana bewildered by government

By Phillip de Wet for Telkom
Johannesburg, 15 Mar 2002

Telkom says it does not understand the direction government is taking with its telecommunications legislation and 30% shareholder Thintana is even more confused about the current situation.

"We don`t understand this legislation. We don`t understand the regulation. We don`t know where this industry is going," Telkom COO Tom Barry said at a media briefing today. Barry also represents Thintana, the joint venture between Telekom Malaysia and American operator SBC Communications.

He said the regulatory environment in SA is "far more confused than it needs to be" and does not induce confidence in foreign investors.

"Government needs to articulate its vision for the industry," he said, adding that clarity would be positive even if that vision does not correspond with what Thintana would like to hear.

Uncertainty about the future of the local market could play a role in a Thintana selling its Telkom stake as has long been speculated. Barry said the group is still gathering information before any such decision is made, but would not deny the possibility. "A well run business is always evaluating its options," he noted.

Telkom is also more likely to hold back on capital expenditure because it has no clear view of the future. Barry said customer premise equipment for digital subscriber line (DSL) services are currently being type-approved, but he noted that a general offer of such services would be beyond the originally envisaged timeframe of June this year. "We have no enthusiasm for big capital expenditure. There will be no big national roll-out [of DSL]; we will probably go for a quiet launch."

As to the legal battle with the Independent Communications Authority of SA (ICASA) concerning the new tariffs implemented in January, Barry said the perception that Telkom is making "obscene profits" is ludicrous, and that the company does not earn a decent return on capital. He would not speculate on the defence Telkom will mount in the case, due in court again in late May.

"We don`t have a defence because we don`t know what the charge is," he said, referring to a failure by ICASA to file papers before the court. ICASA contends the increased tariffs are invalid because they do not comply with its regulations.

The rates issue will likely not be the last time the company finds itself in court. Barry foresees potential problems with the plans for the yet-unlicensed second national operator to share Telkom infrastructure, saying unrealistic sharing criteria could make this impossible.

"We could be back in court by 28 December saying it cannot be done and being told that it can be done," he predicts.