Telkom has made a decision to "selectively" build a fixed wireless and mobile data network, following the allocation of GSM spectrum by the Independent Communications Authority of SA (ICASA).
However, the fixed-line giant will not be able to offer mobile voice.
Telkom CEO Reuben September today told analysts this strategy would improve Telkom`s competitive position and "international bid credentials".
"The group is significantly over-exposed to the South African economy and currency risk, while the SA voice market is highly competitive and saturated. Yet, we are acutely aware of growth opportunities in emerging markets, both in Africa and beyond. It is important to incorporate or obtain mobile capabilities so that we can explore growth opportunities fully, especially in emerging markets," he said.
September explained that the fixed-mobile route provided a more viable alternative to marginal fixed-line operations as mobile technologies were more efficient in various focus areas. These included rural areas, high cable theft and maintenance areas, servicing regulatory obligations like payphones and roaming, deployment of cheaper and more appropriate handsets, roll-out capabilities and enhanced customer satisfaction, convenience, security proposition factors, mobile banking prospects and the like.
Although Telkom would like to include mobile voice as part of its services, September revealed it will only be able to offer mobile data.
"I have no reason to believe that we would be prevented from competing on mobile voice services [by ICASA]; but this is currently prevented by our shareholder agreement with Vodafone. If we can go beyond that and be released from our agreement, then we will certainly enter [mobile voice]," he said.
Very selective
"I must preface this roll-out of a fixed-mobile network with the fact that it will be highly selective. A selective build programme, focussing on rural areas, niche high average revenue per user and data opportunities makes strategic sense. Mobile capabilities complement Telkom`s fixed-line offering," he commented.
Telkom says the "depth and pace" of penetration levels will be based on existing co-location synergies, network sharing and roaming agreements with mobile operators and revenue share arrangements with suppliers.
Funding for this roll-out will have to compete with Telkom`s other capital expenditure programmes - including its five year next-generation network (NGN) deployment.
Said September: "We are fortunate in that there are a number of initiatives competing for capex. We will start from a point on what the most optimal cost structure is in terms of debt to equity ratio. However, if some of our NGN projects need to make way for fixed-mobile, then we will do so. I must stress that we intend to be careful about how we invest so that we get the optimal returns."
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