Telkom to reduce call prices

By Rodney Weidemann for Telkom

Johannesburg, 16 Sep 2004

Telkom plans to reduce prices in a number of areas as a means of meeting competition head-on when the liberalisation of the telecoms sector takes place on 1 February next year.

Telkom CEO Sizwe Nxasana would not elaborate on the value of the reductions, but said it would happen as a response to the liberalisation of the market announced by minister Ivy Matsepe-Casaburri earlier this month.

The minister`s announcements included the legalisation of voice over IP, allowing private telecommunications network operators to resell spare capacity and facilities, making allowance for self-provision and allowing mobile operators to utilise any fixed-lines for the provision of service.

"Our domestic long-distance voice traffic and our international voice traffic are areas where we may be vulnerable to competition," says Nxasana.

"We will be looking at how we will best be able to compete with other players in these fields and will definitely be seeking more competitive tariffs in these areas."

He says the company will adjust its business plan in some areas to generate more savings, but Telkom will not alter the guidance it has given to its investors and the market.

The announcement of the latest reductions follows the monopoly`s statement that it has requested a reduction of between 10% and 25% on the charges for international data circuits via submarine cable from the Independent Communications Authority of SA (ICASA).

The company also wants a 3.6% reduction on monthly charges for international data circuits via satellite, with the price reductions set to affect the most popular bandwidths.

Since the announcement of the liberalisation of the market, Telkom shares have dropped from 7 950c on 1 September to 7 406c this morning. This morning`s price was down 16c from yesterday`s close.

Telkom has also recently been embroiled in a dispute with three labour unions around its planned staff retrenchments.

Asked whether the adjustments Telkom is making to face up to competition could lead to further job cuts, Nxasana says: "We have a technology plan as we move forward and don`t see any reason to adjust it at this point, so it is unlikely there will be any additional retrenchments."