Telkom prepares for mobile move

By Martin Czernowalow for Telkom
Johannesburg, 18 Nov 2008

Telkom plans to become SA's fifth cellular provider by the middle of next year, and is preparing to enter into talks with an existing mobile operator to roam on its network.

Speaking after presenting the company's interim results for the six months to 30 September yesterday, CEO Reuben September told ITWeb the company would employ a strategy of “selective build” to add mobile capability to its existing infrastructure.

The fixed-line operator earlier this month signed a deal to shed its 50% stake in SA's biggest cellular provider, Vodacom, for R22.5 billion. The deal will see with UK-based mobile giant Vodafone, a 50% Vodacom shareholder, increase its interest to 65%, while the remainder of Telkom's share will be unbundled to shareholders.

Even before signing the deal, Telkom indicated it would look into providing its own mobile service, as part of its drive to become a pan-African converged communications services provider.

Yesterday, September stressed that Telkom's plans to selectively beef up its infrastructure and to roam on an existing mobile network is a “far more optimal strategy” than for it to build and operate its own mobile network.

“We have no intention of becoming the country's fourth network operator, but we do want to be the fifth mobile provider,” he said. “Our build will be small. We are preparing to talk to a mobile operator (about a roaming agreement), but we intend to be in a position where we have options and can seek the best deal.”

September revealed the operator would like to be in a “fair state of readiness” by May/June next year, when the Vodacom sale is expected to be finalised.

Superior position

Telkom has already started work on a fixed-wireless network that will provide mobile data and fixed-wireless voice services. The network currently consists of 38 base stations in Johannesburg and Pretoria, with an eventual target of 220 base stations countrywide. Trials are currently under way for the mobile data and fixed-wireless voice services, while the mobile voice product is being trialled and developed internally. According to the current shareholders' agreement, Telkom is prohibited from trialling mobile voice services at this stage.

While the company is effectively pulling out of a lucrative business with the sale of its Vodacom stake, September pointed out that this is to Telkom's advantage, as it will remove restrictive conditions contained in the shareholders' agreement. This, he said, will allow Telkom “rapidly and aggressively to reposition itself to take advantage of the strength of the fixed-line network to move into fixed-mobile convergence”.

“Telkom must be seen as a standalone, profitable entity. The net result is that we will find ourselves in a far superior position than having a purely financial investment in Vodacom, which allowed no competition or expansion into the mobile environment.”

During his financial results presentation, entitled “Freedom to Compete”, September highlighted the solid performance of Nigeria telecommunications provider Multi-Links, in which Telkom has a 75% stake. The company, which offers fixed, mobile, fixed-wireless and data services, has seen its subscriber base increase by 579%, to 1 780 984, during the six months to 30 September.

Multi-Links, said September, is positioned to give Telkom a foot in the door to provide converged services in Africa, including a foray into the African mobile voice market.

“I am excited about Telkom's repositioning within the market. Our strength is our network and we intend to utilise the proceeds to leverage this strength for the benefit of all stakeholders.”