Telkom's IT offerings doomed without BCX

Fixed-line operator Telkom will be severely disadvantaged if the Competition Tribunal refuses its R2.4 billion takeover of Business Connexion (BCX), as the operator has been unable to successfully grow organically in this space.

Hendrik Matthyser, Telkom's executive of the Business Integration Service, says the company entered the IT services arena in April 2001. It began by offering Internet services and gradually built up to IT services, which it has been offering for between two and three years.

While Telkom's IT services division has exceeded its expectations in Internet service provision, it has underachieved in higher-level business processing aspects, says Matthyser. He attributes this to a lack of resources internally. "It's not easy to join a very competitive market."

Should the merger with BCX fail, says Matthyser, the division would endeavour to grow organically. "It would be an uphill battle in that environment."

Matthyser says the company would be at risk in the IT services arena if the merger failed. He points out Telkom will be at risk as the ICT industry deregulates. He says it would be disadvantaged by joining a converged environment, while the industry moves ahead and offers new services.

He says the impact on the company's revenue would overtake its ability to grow organically.

Matthyser was answering questions posed by advocate David Unterhalter, who is acting on behalf of Telkom and BCX, during the Competition Tribunal's hearings into the proposed merger. The hearings are expected to be wrapped up towards the end of April.

Unterhalter has requested Neotel, SA's second national operator, to testify at the hearings to clarify its position in the telecommunications landscape.

Neotel, as a start-up company, would be able to access Telkom's infrastructure for two years as part of a licence agreement. The second national operator will be allowed to access the network on a facilities leasing basis. "They do not have to dig trenches in that time."

Matthyser says Neotel will have an advantage over value-added network service providers. It will also have an advantage over companies such as Dimension Data and Internet Solutions to build a virtual private network in a shorter time, argues Matthyser.

He adds Neotel will be in a competitive position to provide voice services to SA and, with interconnect agreements with SA's three cellular operators, will be able to compete effectively.