Absa, Telkom in five-year satellite deal

Johannesburg, 18 Sept 2001

The Absa group and Telkom have announced an alliance that will see Absa act as intermediary for Telkom products and Telkom supplying most, if not all, of the telecommunications services Absa requires throughout Africa.

[VIDEO]The deal is worth in the region of R420 million this year.

The basis of the deal is a memorandum of understanding between the companies that extends for an indefinite time. The result is that Absa will source all its satellite connectivity from Telkom for the next five years, including an additional 800 automatic teller machines to be moved to satellite. Absa has operations in Tanzania, Zimbabwe and Namibia, and is due to open branches in Mozambique and other African countries, which are expected to use mostly satellite connectivity.

Telkom is also to have first right of refusal for any telecoms services the group requires. Among other things, that clause could see Telkom take over from ICL SA as the driver behind the free Internet service that the bank offers when the 12-month ICL contract expires.

[VIDEO]In return, Telkom is to guarantee Absa service levels such as a 99.5% uptime on satellite connections. It will also link its national network operations centre to the Absa command centre, and will cap the rates on certain services.

Absa expects the result to be a saving of R38 million in this financial year, much of it derived from the rationalisation of data lines.

Louis von Zeuner, group executive director of Absa, says there will also be a direct revenue benefit. The increase in teller machine uptime from 98.7% to 99.5%, for example, is expected to see an average of 500 000 additional transactions successfully completed through the Absa system. Revenue is derived from each of these transactions individually.

[VIDEO]Von Zeuner says customer convenience is also an important factor. "It fits into the portal idea," he says. "There is value in being a one-stop shop and you can use that in marketing."

Absa says the memorandum of understanding also includes a clause which will see the rates it pays adjusted should Telkom lower its fees in response to upcoming competition. "We have an agreement that whatever transpires in the market will be reflected in our pricing," says Von Zeuner.

Telkom: We are not tying up customers

[VIDEO]Telkom has in the past been criticised for locking its larger corporate customers into long-term deals with beneficial pricing on services, which was seen as an attempt to forestall the competition to be introduced next year.

However, Telkom corporate account executive Johann Henning says much of the Absa deal is based on efficiencies Telkom is deriving from its investment in technology, with savings passed on to its clients.

"We also now have the technology to commit to service levels," he says, although he acknowledges that "competitive pressure is always good".

Absa is Telkom`s largest corporate client and Telkom expects the second national operator to target its corporate customers first, as large companies bring in much of the revenue the operator generates.