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Telkom: Expect price hikes


Johannesburg, 22 Mar 2005

Telkom says it is likely prices of local calls will rise in the short-term, citing the cost of managing the local loop.

A Telkom spokesman told ITWeb that the operator had spent a lot of money on rolling out its network and is still in the process of reaping returns on the investment, a factor that it says would continue to affect its price structure.

Prices will rise and remain higher until the company feels it has reaped those returns.

The fixed-line operator has seen a jump in long-distance and international traffic since it cut its tariffs in January, but insists it needs to raise prices again to protect its profit.

The company has chosen to stay mum on the specifics regarding how long the prices will stay high.

Telkom slashed the cost of international calls by almost a third and long distance calls by almost 10% from the beginning of this year as it prepared for the legalisation of voice over IP (VOIP) services in February.

At the same time, it raised rental and connection fees by 6.3%, a move that provoked nationwide criticism and accusations of it taking advantage of its monopoly.

The company also declined to comment on the possible migration of some of its subscribers to VOIP service providers upon the increase in tariffs.

However, it is confident that if the current subscriber rate and interest in its ADSL services continue to grow at the current rate, prices on that side are sure to go down.

Telkom added that in terms of the Independent Communications Authority of SA`s price control regulations, the price of its services will, in real terms, decrease. The company claims there has, historically, been an imbalance in local calls and rentals, which are cross-subsidised by long-distance and international call charges.

"This cannot be sustained in the long-term as it is economically unsound. Therefore the gap between local, long distance and international calls will have to be reduced and because of this it is unlikely that local call charges will come down in the short-term," the spokesman said.

Nigerian stake

Meanwhile, the company believes it could soon be a dominant player in the Nigerian telecoms industry as it, together with 20 other interested parties, expressed interest in acquiring the 51% stake in Nitel, which the government has put up for grabs.

Telkom, which intends to bid for the stake with its 50% cellular subsidiary Vodacom, hopes to take advantage of both the mobile and fixed-line opportunities in Nigeria. Nitel also has a mobile division, M-Tel.

Vodacom has already expressed that it would be more interested in acquiring M-Tel`s rival V-Mobile, upon the Nigerian company`s resolution of its lawsuits.

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