Telkom plans to build 'Chinese walls'

Telkom's plan to bring a greater degree of separation between its retail and wholesale operations does not go far enough to see the two networks have completely different structures, says a Telkom senior manager.

The manager, who wishes to remain anonymous, was reacting to comments made by Telkom's outgoing CTO, Thami Msimango, this week. In the ITWeb report, Msimango confirmed speculation that the country's most powerful telecommunications utility had such plans.

The senior manager says Telkom's plans do not go as far as some of its peers, such as British Telecommunications (BT), which saw its retail operation become almost a separate company.

He says Telkom's plan involves an internal restructuring that will allow for greater focus on two different market segments by putting in place more "Chinese walls".

This will allow for better protection of customer information and the separation of accounting systems, a task that is already completed, he says.

Telkom CEO Papi Molotsane and the Telkom board still have to approve the final plan and an announcement is expected before June.

Mike van den Bergh, CEO of Gateway Communications, says Telkom's restructuring will have to be more than "new lines drawn on a chart" to make a real difference.

"We will have to see just how far it goes before we get a sense of real confidence in what the new structure will be," he says.

The main issue is that Internet service providers would like to be treated on an equal footing with Telkom Internet/SAIX, without any of the hidden cross-subsidisation that currently appears to exist, says an industry insider, who asked not to be named.

Criteria must also be clearly set out as to when the fixed-line operator would make a distinction in pricing or services to Telkom Internet/SAIX, perhaps due to risk of payment being reduced or quantity-based discounting, he says.

Hillel Shrock, business development director at Internet Solutions, says Telkom's restructuring process should also have greater emphasis on governance.

"It is really important that customer information is well protected. But they are being proactive by possibly pre-empting the regulator in doing this," he says.

The industry insider denies Telkom's planned wholesale/retail separation was prompted by competition matters that arose out of the Business Connexion (BCX) acquisition attempt, as suggested by the Telkom senior manager.

Telkom has been looking at separation similar to BT's approach for at least two years, he says. "The BCX issue may have accelerated the discussion, but certainly did not initiate it."

He adds that some regulators around the world have forced the break-up of telecoms companies into smaller entities or wholesale and retail arms. BT avoided the forced break-up by way of a voluntary separation in 2005, a move Telkom seeks to emulate, he says.

Telkom would not comment on the issue.

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