Telkom claims it will release its Telkom Mobile offering before the year is out and - with seven months to go - analysts say the company will have a tough time cracking the market.
Telkom has played its cards close to its chest on its mobile plans. However, it has made some significant strides to get its offering off the ground, most notably its surprising roaming deal with MTN.
The companies signed a deal in April, stunning the industry on the choice of roaming partner, since many expected a deal would be struck with former 50% subsidiary Vodacom. Telkom has also announced it plans to invest R6 billion into its mobile business over the next five years.
Despite the strides made already, there is a concern Telkom may be running out of time to get something into the stable by the end of the year.
Steven Ambrose, MD of WWW Strategy, says if the company planned to release a mobile offering within the next three to six months, it will have to start making some serious moves. “As far as we can tell, there have not been deals with any of the handset manufacturers yet and, if they are planning to launch soon, they will need that in place.”
Price is key
However, he says with Telkom mum about its plans, there is no way to know how it will come to market, and what its plans are. “They will have to be aggressive on price, if they want to tackle the prepaid market.”
Ambrose notes that Telkom Mobile will have an easier time of accessing the market and competing on price than Cell C, specifically because of lower interconnect rates.
Cell C, Vodacom and MTN are well entrenched in the lower income markets, he comments, where Telkom has fared better with people using landline and ADSL technology. “Telkom also has historical cultural aspects to deal with. They will need to get rid of the outdated practices customers have to go through to get connectivity, otherwise they will not make it.”
Stephen Meintjes, analyst at Imara SP Reid, says Telkom also has a reputation to rebuild. “Telkom and its management are not highly regarded,” he adds.
He says that to tackle the prepaid market, Telkom will have to put all its muscle into marketing to make any headway against the incumbents. “But that could be an exercise in lots of money for little return,” he explains.
Bundles will win
Despite Telkom's tough prospects in the prepaid market, both Ambrose and Meintjes say the company does have a compelling offering when it comes to bundled services. “Telkom will be the only complete telecoms provider in SA,” adds Ambrose.
He says many South Africans with landlines and DSL services will be interested in adding cellular to the mix, and getting it all managed on a single account. “People underestimate the skills available in Telkom, and its strengths.”
Telkom has made significant investments in infrastructure in the run up to the World Cup, which has been Telkom's focus for this year. However, Ambrose says that, once the soccer spectacle is over, Telkom could easily turn that infrastructure over to its mobile services.
While Telkom has not indicated who will be running the business, Ambrose says it's likely it will be a past employee of one of the mobile operators.
Telkom is an old-school company that traditionally employs from within. However, Ambrose says the head of the mobile business will need to have a particular skill set, which will likely see it hiring from outside.
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