Telkom Mobile muscles into market

Incoming Telkom Mobile is entering the mobile market swinging, not only taking on MTN, but now also Vodacom and Cell C in its fight for an asymmetrical interconnect rate of 93c per minute.

Yesterday, it was revealed that Telkom and MTN were at loggerheads over Telkom's proposed rate of 93c per minute, with MTN insisting on maintaining its standard rate of 89c. The Independent Communications Authority of SA (ICASA) has intervened in the matter, which will be heard at the end of this month.

But the fight doesn't stop there, as Telkom prepares to take on the rest of the mobile industry as well. Telkom this morning confirmed it is in similar disputes with mobile operators Vodacom and Cell C, and would likely follow a similar course of action as that undertaken with MTN.

The fixed-line operator maintains its actions are justified if it is to ensure a competitive offering in the market.

“The terms proposed by Telkom include a reasonable mobile termination rate (MTR) that reflects Telkom's mobile network cost as a new entrant to the mobile market. Telkom needs a reasonable MTR in order to be able to compete in the South African mobile space and offer subscribers attractive retail rates,” says the company.

Spiwe Chireka, industry analyst at Frost & Sullivan, agrees and maintains this is hardly a case of Telkom flexing its muscles. She argues that the company is entitled to seek an asymmetrical rate, being a newcomer to the mobile industry.

Telkom is looking for a competitive way forward; an asymmetrical interconnect rate is that way, adds Chireka. She argues that the company's dominance in the fixed-line market has no relevance to its new mobile play. This time MTN and Vodacom are the incumbents, she says.

Hurst argues that Telkom is well established in the local telecommunications market and for that reason its market power cannot be ignored.

He notes that it would be interesting to see what ICASA decides specifically around what qualifications are necessary to qualify for asymmetrical rates.

Both analysts agree all the players involved in this dispute are victims of incomplete and ill-developed interconnect regulations.

Telkom has committed to having its mobile offering fully operational before the end of the year. However, the time required to resolve Telkom's dispute with the mobile operators will likely extend into next year, as the authority need only submit its ruling 90 days after the hearings.

So far, only MTN's case has been scheduled for 30 September. Telkom's dispute with Cell C and Vodacom has not yet been heard by ICASA, and a date not yet been set.

Nonetheless, the Telkom is still confident it will be in a position to unveil its mobile service this year as it has in the interim entered into interconnect agreements with the mobile operators.

If ICASA has not yet ruled by the time Telkom Mobile starts operating, the interim agreement of a symmetrical 89c per minute will come it to play.

However, Telkom is clear this is subject to ICASA's ruling and may change if the ruling is favourable to Telkom.

Hurst believes Telkom has been fully aware it would be a battle to break into the mobile market and is less than confident of the company's success.

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

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

Hurst is sceptical that Telkom can offer a bundled product that can lure current 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 same size as MTN and Vodacom.