Telkom has revealed it will invest R6 billion over the next five years to get its mobile business up and running.
The company released its interim results for the six months ended 30 September 2009 late yesterday afternoon, its first financials since it sent Vodacom from its stable. The results sported several disappointing figures. A loss of income from the lack of Vodacom, increased competition and another pay-out to its Nigerian operations left its profit in the doldrums.
Telkom CEO Reuben September will have a monumental task to turn the business around. His results statement says the company will use mobile and its new data centre strategy to bring the business back in line with competition.
While Telkom says it plans to invest around R6 billion over the next five years to get its mobile business off the ground, there is speculation that the company may need to accelerate its mobile plans to compete effectively against well-entrenched MTN and Vodacom.
On the move
Frost & Sullivan ICT industry analyst Spiwe Chireka says mobile would be an ideal opportunity for Telkom. However, she adds that the fixed-line business will need to be innovative to gain any market penetration.
According to the company's results, it has 8 744 existing W-CDMA subscribers, who were provided with mobile data service and fixed look-alike products in those areas hard hit by copper theft.
Telkom's hopes to invade the mobile market will be based on bundling both fixed-line and mobile services, which may help to gain some market share. However, most industry watchers say it will have to come in with a significant value proposition.
While Telkom plans to roll-out mobile, the company seems to be focusing on providing mobile data rather than mobile voice. “We believe there is a market opportunity in SA as mobile voice and especially mobile data are still experiencing growth. Telkom has a competitive advantage by virtue of its existing assets and customer base,” explains the company.
Making connections
A recent agreement between the mobile operators and the Department of Communications, to drop mobile termination rates, could be the boon Telkom needs to get its mobile operation off the ground, since it will pay less to the operators to terminate on their networks. Telkom has not been asked to drop its rates, and will keep growing its interconnect revenue, which could help with penetration of its own mobile service.
It is unclear whether Telkom will be allowed to charge the same interconnect rates as the mobile operators for its own mobile network termination.
The embattled company will reveal little else about its mobile business, as it is concerned competitors may oust it from the market before it begins. “Information regarding our network build and go-to-market strategy cannot be disclosed due to competitive sensitivities.”
Telkom will need to make this strategy work, since mobile, along with the success of its Nigerian operation, Multi-Links, is intended to pad the revenue losses the company will suffer without Vodacom.
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