October unveiling for Telkom Mobile?

By Leigh-Ann Francis for Telkom

Johannesburg, 29 Sep 2010

Fixed-line incumbent Telkom seems to be gearing up to unveil its mobile offering by mid-October, if a mystery event invitation is anything to go by.

Yesterday, the company sent out an invitation to the media for an event to be hosted on 14 October, at Lanseria Airport.

Not revealing too much, the invitation reads: “The time has come. Telkom is stepping into an era with unlimited possibilities.” All speculation points to the unveiling of Telkom Mobile.

However, Telkom would not confirm this and has preferred not to comment as to whether the event is related to the unveiling of Telkom Mobile.

The speculation is fuelled by Telkom's earlier announcement that its mobile offering will go live before the end of this year. At the company's financial year-end results, it noted that most of the pre-launch logistics had already been ironed out.

At the time, the operator confirmed it had already concluded distribution, roaming and co-location agreements, and has all the relevant IT systems in place to roll out the service.

Telkom shed the stake in March 2009, and has since come under pressure as its fixed-line revenue has dwindled. Its proposed foray into mobile is seen as a “do-or-die” bid to stay profitable and competitive.

However, analysts have been sceptical about Telkom Mobile's success, as it is entering a saturated market, dominated by Vodacom, MTN and Cell C. Telkom's offering would have to be very compelling if it is to successfully take any significant market share away from the established operators, they say.

Window of opportunity

Frost & Sullivan industry analyst Spiwe Chireka is confident the event may be the unveiling of Telkom Mobile as the company is not really working on any other major projects.

She maintains that the timing is good as she argues that Telkom cannot afford to delay the launch any longer. As fixed-line subscriptions dwindle, the company will rely on its mobile play to turn around flat profits.

Chireka says that, if this is indeed the unveiling of Telkom Mobile, the offering would be just in time for the end of year buzz.

Telkom's mobile offering:

* At inception, Telkom will offer voice, 2G and 3G data, SMS, MMS and USSD on a national basis as a result of its roaming agreement with MTN.
* Telkom will also offer a full international roaming service at launch, through another international service provider.
* Products will be provided by a unified 2G voice and data and 3G (including HSPA) voice and data network.
* Suppliers include AMDOCS (for FAB services) and Huawei (for network and billing support services).
* The mobile network deployed is an IP Radio Access Network.
* Technology used for backhaul is IP over Ethernet or IP over TDM, and Telkom will use co-transmission of 2G and 3G traffic onto the same backhaul circuit, and prioritise traffic.
* Telkom will deploy software definable radios, which are LTE-ready.
* The core network architecture deployed is also based on a full IP-based network.
* Telkom ordered 2 000 base stations, which are in the process of being constructed, in the first year. It plans to cover 40% of the population at inception.
* The company is negotiating “innovative” financing structures with suppliers to trim capital spend.

“Telkom cannot afford to delay the launch any longer. The longer it waits to unveil the offering, the more time the existing incumbents have to prepare for the incoming competition.”

Chireka points to Vodacom's recent unveiling of mobile banking service M-Pesa as a possible reaction by the mobile operator to the incoming competition from Telkom Mobile.

Fighting chance

As a new entrant, in the close-to-saturated mobile market, Telkom is already shaking things up by taking its rivals to the Independent Communications Authority of SA (ICASA) to heed calls for an asymmetrical interconnection rate.

Telkom and MTN have been loggerheads over Telkom's proposed rate of 93c per minute, with MTN insisting on maintaining its standard rate of 89c. It has since been revealed that Telkom is in a similar dispute with Vodacom and Cell C.

ICASA has intervened on the matter and hearings have been set for 30 September and will have three months to make a ruling thereafter. In the interim, MTN and Telkom have agreed to a symmetrical rate of 89c.

Chireka maintains that Telkom is justified in its calls for the asymmetrical rate, as - despite the company's dominance in the fixed-line market - it will be new to the mobile space.

She says the operator has made a good decision to have an interim agreement in place so that, in the event that ICASA rules unfavourably for Telkom, it will be able to continue business as usual.

However, analysts argue that the interconnect argument will be the first of many hurdles facing the newcomer.

Independent telecommunications analyst Richard Hurst says Telkom is coming in at a disadvantaged position. He points out that Cell C, which came to market after Vodacom and MTN, has had to battle to gain market share.

Telkom will have to be more agile and innovative, he says. “Coming in as the fourth player, it's really going to be difficult for them.”

Hurst is sceptical about whether Telkom can offer a bundled product that can lure cellphone users onto its network. “Even if Telkom bundles, there are a limited number of landlines. In the mobile game, you need millions of subscribers.”

Telkom will have to be extremely innovative, maintains Hurst. Even then, he does not see Telkom Mobile reaching the size of MTN and Vodacom.