Cape Town, 10 Apr 2006
Second tier telecommunications operators are worried about the timing of Telkom`s R30 billion upgrade plan and believe it could entrench its anti-competitive behaviour.
Last week, the country`s only fully operational licensed telecommunications utility announced that about half of the planned expenditure would be on a new generation network, saying the expenditure would take place over five years.
"The size of the investment is due to the fact that Telkom has made very little investment in its infrastructure over the past few years," says Internet Solutions CEO Angus MacRobert. "It is a matter of it catching up."
He says it is unknown if the plan encompasses a converged Internet Protocol network, but Telkom has to lessen its dependency on voice business and move strongly into the data market.
Insufficient expenditure
"They, and us, have always been in the data business. However, voice, for us, is a market that we can move strongly into, while they have to try keep that business while expanding into data," he says.
MacRobert adds that the planned expenditure would probably not be enough, compared to Telkom`s international peers.
"British Telecommunications, for instance, is spending about lb1 billion per year on upgrading its network," he says.
Storm joint-CEO Tim Parsonson says the planned upgrade is to be welcomed, but companies such as his should be allowed the same access to the wholesale business as Telkom`s retail operations.
"It is fine if it helps stimulate competition, which allows costs to come down. However, if they use it to entrench their anti-competitive behaviour, then we are back where we started," he says.
Parsonson says Telkom`s announcement is a validation of the convergence trend.
Timing questioned
Verizon Business Solutions executive Elia Tsouros says the plan was not well received by Telkom`s shareholders and the timing of the announcement is also open to questions.
"The shareholders have shown their displeasure and at the same time Telkom`s timing is important because the main competitor, the SNO [second national operator] is still about 18 months away from really offering competitive services," he says.
Tsouros says the timing is almost too late, as there are other potential Telkom competitors on the horizon, such as Wireless Business Solutions, which supplies iBurst, and government`s plans for signal distributor Sentech to also enter the voice arena.
An analyst with the local office of an international investment bank says the capitalisation plan, at first glance, seems to be a lot of money as it almost equates to the total value of Telkom`s core network.
"What we don`t understand is just how they are going to implement this upgrade. Surely Telkom won`t just throw out the old network," he says.
Telkom`s share price is still suffering from the hangover of last week`s announcement that caused it to plunge almost 8%.
In mid-morning JSE trade today it slipped 50c to R149.50 after 683 000 shares had changed hands.
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