Telkom Mobile ready to roll

Johannesburg, 22 Jun 2010

Despite having completed all the legwork in preparation for the unveiling of its mobile service, fixed-line telecommunications operator Telkom is still unclear about an exact launch date.

Testing of the service is expected to commence next month, as Telkom tries to fill the void left by the unbundling of its 50% stake in Vodacom. The mobile operator was a major revenue-spinner for Telkom and, following the sale just over a year ago, the fixed-line giant almost immediately announced plans to enter the mobile space as the country's fourth mobile provider.

The company has committed to pumping R6 billion over the next five years into the new offering.

Telkom CEO Reuben September, speaking at the company's annual results yesterday, clarified that the service would be unveiled during this calendar year, but would not commit to a date.

This is despite the fact that Telkom has already concluded distribution, roaming and co-location agreements, and has all the relevant IT systems in place to roll out the service - currently dubbed Telkom Mobile.

September also noted that the brand and products relating to the service have been developed.

A delay in this move means the telecoms giant will continue to feel the competitive pressures in the voice market. This includes the effects of fixed-to-mobile substitution and least-cost routing on declining traffic revenue streams currently plaguing the telecoms provider.

Telkom SA's traffic revenue slipped by 9.3% over the year to March. This was attributed to growing competition and increased fixed-to-mobile substitution. The fixed-line penetration rate in the country also dropped from 9.1% to 8.7% during this period, reports research firm Frost & Sullivan.

September acknowledged that the deployment of a mobile service is one way of winning back traffic to the Telkom network.

“In fact, Telkom has a competitive advantage by virtue of its existing business and customer base. This is particularly so as wireless growth slows down and converged data becomes more prevalent,” he explained.

September added that both mobile and fixed value pools would assist Telkom to defend itself more effectively against competitors and aid revenue growth. “With mobile voice and, especially, mobile data still experiencing growth, there are tremendous market opportunities in SA,” he added.

World Cup delay

Meanwhile, it's all systems go for the mobile offering, but no kick-off whistle, as Telkom attributes its non-commitment to a specific roll-out date to the 2010 Fifa Soccer World Cup.

“The biggest challenge that we have is the Fifa World Cup. We are the main providers of services for the World Cup and, at the end of the day, how do we stretch ourselves further?” explained Telkom SA MD Nombulelo “Pinky” Moholi.

“Our network is in a frozen state now. We are unable to make any new changes on the network at the moment if we are to safeguard the quality of the network, while we are delivering for the Fifa World Cup.

“However, by mid-July we will be able to begin testing the service,” noted Moholi.

Telkom has already ordered 2 000 base stations, which are in the process of being constructed.

“We plan to have 40% of our own population coverage at launch, which will be grown as required over five years. Full national coverage will be provided through the roaming agreement with MTN,” stated September.

Frost & Sullivan ICT industry analyst Spiwe Chireka feels Telkom's mobile venture could be key in expanding the group's revenue and customer base. However, she argues that the market is already quite saturated, even in the data and Internet segment, so it's likely to be very challenging for Telkom to hit the ground running with its mobile offering.

Telkom's roaming agreement with MTN covers services such as voice, 2G and 3G data, MMS and USSD on a national basis. Telkom will also offer a full international roaming agreement at launch.

To take these services to market, Telkom is required to negotiate mobile interconnect agreements with other mobile and fixed operators.

These negotiations are at an advanced stage, with the following mobile products and services initially on offer: prepaid, postpaid and hybrid voice and data services provided by a unified 2G and 3G voice and data network.