AT&T, Telkom to shake up Africa

By Candice Jones for Telkom

Johannesburg, 17 Apr 2009

Telkom's agreement with AT&T “changes the rules of the telecommunications game”, placing Telkom in a position to compete aggressively in Africa.

This is according to BMI-TechKnowledge MD Denis Smit, who adds that with the strong international backing of AT&T, Telkom has matched the global presence that Neotel has through its Tata investment.

AT&T and Telkom yesterday announced a deal that will see the companies partner to provide telecoms services to New York-listed AT&T's global customers hoping to expand on the continent.

According to AT&T business solutions CEO Ron Spears, the company has 1 800 global enterprise clients to which it provides services. He adds that many of those businesses are looking to Africa as an expansion opportunity.

Levelled playing-field

The deal has been in the pipeline for 10 to 12 months, and the specifics around which a full contract will be negotiated will take “time and effort”, says Spears.

The deal is still in memorandum of understanding status, and Telkom CEO Reuben September says no actual costs or investments have yet been decided; instead financial indications will depend on particular cases in specific regions.

Smit says AT&T's global reach is a boon for Telkom, since it gives the company the access Neotel has had since its inception. “This evens out the offerings between the two local companies,” he adds.

Telkom has also made it clear it intends to compete aggressively on the African continent. Frost & Sullivan ICT industry analyst Lindsey Mc Donald says AT&T's deal will give Telkom a good basis from which to start.

Match-makers

Mc Donald says AT&T is also in a winning position. “Telkom are fantastic infrastructure providers. Their networks have always been excellent. It makes sense to combine Telkom's infrastructure capabilities with AT&T's service expertise.”

Mc Donald says larger American businesses may be more likely to take a chance on a well known brand name like AT&T than take up communications services from an African company. “Having a home name will make them more comfortable with the services they expect to receive.”

Europe and American operators provide services the likes of which of African business owners have never seen, she adds. “This is part of the reason those companies will be more comfortable with AT&T in Africa.”

Investment horizon

According to IDC analyst Richard Hurst, a deal with a global giant like AT&T is an optimistic move for SA's fixed-line player. He says while the opportunities are bound to play out for both businesses, it will take some time before the fruits of the agreement will be developed to the fullest.

Spears says the company has completed similar deals in other emerging markets with good success rates. AT&T has made comparable deals in China and the Middle East. “We were fortunate enough to procure a licence in India, so we expanded there ourselves.”

With the mass of local and African capacity on the horizon, analysts agree international investment will soon be on the rise. Hurst explains there will be more deals of this kind in the near future.

He says while infrastructure is not quite where it needs to be, competition on a services-based level may be the trend of the future.