Altech weighs in on convergence battle

JSE-listed Altech is gearing up to take on communication heavyweights in a move that will increase competition in the sector; ultimately benefiting end-users as prices will be forced lower.

With the imminent shift to telecoms convergence, market commentators say the sector is going to see a wave of consolidation, with smaller companies being bought out, or closing their doors. This will be the biggest change in the South African telecoms landscape since the introduction of mobile operators about 17 years ago.

Reunert has already fired the first salvo, buying ECN Telecommunications for an undisclosed amount to become a converged player in the voice and data space in the next year-and-a-half.

Now Altech is adding its weight to the shift in the telecoms landscape. Altech will finally put its hard-won individual-electronic communications network service (I-ECNS) licence to work. It is set to take on industry heavyweights, such as Internet Solutions (IS), which claims to be Africa's leading IP-based communications service provider, and MWeb.

Three years ago, Altech took on late communications minister Ivy Matsepe-Casaburri in a lengthy court battle to force government to allow value-added network service providers to build their own networks.

Altech's win paved the way for more than 400 value-added network services to self-provide through electronic network services licences (ECNS), instead of on-selling Telkom's services. Matsepe-Casaburri had doggedly opposed this concept since September 2004.

However, Altech hasn't made use of its hard fought win, preferring to concentrate on rolling out a network in Kenya, where the market was, until now, more open to competition.

Altech has spent R35 million in the last six months on a network for Altech Technology Concepts (ATC) to ready it to play in the converged space.

Cellular services provider Autopage and ATC will share the licence and offer converged voice, data and triple-play solutions, says Venter. He says the company has access to capacity on undersea cable Seacom, and a data centre and is moving up the value chain.

Altech initially focused on its East Africa operations, says Venter, because that market was more liberalised. He explains when former communications minister Siphiwe Nyanda was at the helm of the department, there wasn't any interaction between government and industry, and Altech wasn't receiving the right signals.

Roy Padayachie, who took over the portfolio towards the end of last year, has “been a breath of fresh air”, says Venter. He says more liberalisation is happening, such as local loop unbundling, and it's the right time to use the licence.

Venter says ATC and Autopage “won't compete head-on with IS tomorrow”, but will over time. The sector needs competition, and Altech will rival other players.

ATC is only just at the point where it has a complete network, notes Venter. There is no specific date for when full-scale competition will be launched, but Autopage's million subscribers will start “seeing stuff happening”, says Venter.

To build critical mass and bolster Autopage's subscriber base, Altech is looking at acquisitions in the space, says Venter. He comments that communications is an economies-of-scale game, and companies that only offer voice “will die”.

Richard Hurst, senior analyst of emerging markets at Ovum, says Altech will bring “real, viable competition” to the market, because it has the financial muscle and technical know-how to “inject a new level of competition into the market”.

Hurst says the market is moving towards converged offerings, which has been on the cards for years. The shift will see increased infrastructure investment, healthy competition, and lower prices for end-users, he says. “The end-user is set to benefit here.”

In addition, companies are likely to share infrastructure, which will trim capital spend and also result in end-users benefiting through lower prices. “We'll see sharing of infrastructure between what might in the past have been two deadly enemies.”

Steven Ambrose, MD of WWW Strategy, says companies need big money and scale to play in the space because of low margins. However, it is a “vital new frontier” for IT companies, which will be forced to play in the converged space.

As Altech is a large company, it will be a heavyweight in the sector with the ability to increase competition, forcing prices down in the voice and data sector. “Altech could end up being a formidable player.”