Two weeks ago, the industry was surprised by Telkom`s announcement that it was planning to invest R30 billion over the next five years. About half would be used to develop a new generation network (NGN) and to encourage the group to become more customer centric. It was not clear how the remaining R15 billion would be spent.
Although Telkom is not spending the R30 billion entirely on its NGN, the amount it will spend dwarfs the total proposed investment of the second national operator (SNO).
According to the SNO, it will raise a total of R8 billion to invest in its new operations, but has supplied no specifics on what technology it will invest in or what kind of network it will develop.
Internet Solutions is the only other network operator to publicise how much it is investing in an NGN - R100 million. This is almost trifling in comparison to Telkom`s plans.
That the country needs a refresh of its telecommunications infrastructure is in no doubt. Telkom`s plans are clearly aimed at making it ready to reap the reward of a large slice of the broadcasting revenues generated from the 2010 Soccer World Cup.
Puzzling
It was puzzling that Telkom`s announcement was made during an investor analysts` open day. This implies it was presented to a select audience, whose primary role is to decide whether to buy or sell Telkom shares. Secondly, it made the announcement during the group`s closed period as it prepares for the release of its year-end results on or around 5 June.
So despite Telkom`s claims of investing in customer centricity, it has blatantly left out the customers. Furthermore, it would not allow the investors` representatives to ask financial questions. It spoke of several initiatives already in place, presented the standard industry picture of an NGN and then, finally, provided partial details of half of the total R30 billion capex. So what were the investors asked to invest in?
No wonder the share price got punished with R7.7 billion wiped off the market cap in the two days following the announcement, and it has been punished ever since.
Top guns
Telkom has shaken shareholders who want a clear dividend policy.
Paul Vecchiatto, Cape Town correspondent
On the day in question, presentations were made by most of the Telkom top guns. CEO Papi Molotsane gave a strategic overview where he sketched his group`s five pillars. These are: enhancing customer satisfaction through customer centricity, retaining revenue, maintaining growth, evolving to a NGN, and repositioning Telkom`s external stakeholder management to create healthy external relationships.
Wally Beelders, chief sales and marketing officer, showed how Telkom wanted the whole telecom pie and more. He focused on revenue retention and growth. This includes enhancing the group`s Internet service provider, which operates in direct competition with others that don`t necessarily have the same access to services as it has. He also spoke of the group`s plan of expanding outside this country and increasing DSL penetration to 20% of total fixed lines by 2010 - a rather mediocre ambition, if you ask me.
The presentation by Pierre Marais, managing executive of network infrastructure provisioning, focused on the rationale and groundwork necessary for the NGN. However, it lacked specific time lines and gave little away about how it will slot into the current network.
Unfortunately, Marais` slides made so much use of Gartner-type hype cycles, technology clouds and other visual aids that the message was quite confusing to even the most geekish communications engineers.
Mandla Ngcobo, chief of corporate affairs, gave a clear picture of Telkom`s strategy when dealing with regulatory affairs. It is in the form of a four-part process that moves in a continuous circle encompassing the financial impact of an issue, understanding stakeholders in detail, developing comprehensive engagement plans, and negotiating and communicating. Then the process starts all over again - now we know what is meant by the "local loop".
Scary impressions
Instead of impressing the market with its financial muscle and technology wizardry, Telkom has shaken shareholders who want a clear dividend policy and possibly scared competition witless as they cannot compete with the sheer scale. This means the status quo will be entrenched and telecommunications prices will not come down, so hampering overall economic growth.
There is no doubt the telecommunications infrastructure needs to be upgraded, but it is a pity that it is only Telkom doing it on such a scale.
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