Telkom spills beans on mobile strategy | TechCentral

Telecommunications group Telkom will leverage its existing customers, offering mobile products to them as it gears up to launch SA’s fourth mobile operator.

The company has finally begun to provide some details of its plans in the mobile space, where it is spending R6bn over five years to build a network to rival those operated by Vodacom, MTN and Cell C.

The traditionally fixed-line operator has ordered 2 000 base stations, which will be constructed over the next 12 months. It will spend R6bn building the network over the next five years, it says.

“Telkom is at an inflection point, with growth in traditional fixed-line voice revenues declining,” it says in notes alongside its annual financial results for the year ended 31 March 2010.

“The majority of global fixed-line incumbents have discovered that a successful operation requires an integrated mobile business,” it says. “We believe there is a market opportunity in SA as mobile voice and especially mobile data are still experiencing growth.”

Analysts, however, remain sceptical, with some questioning whether the group should be considering mobile at all. They argue that Telkom is investing in an already mature market.

But Telkom says it has a “competitive advantage by virtue of its existing business and customer base”.

“This is particularly so as wireless growth slows and converged data becomes more prevalent,” it says. “A product range spanning both the mobile and fixed value pools will assist Telkom to defend itself more effectively against competitors and to grow revenues.”

It says also that the mobile business is designed to assist it in addressing “fixed-line cost challenges and to position Telkom more competitively in the market”.

“To this, end Telkom will undertake best endeavours to attain the market share required to achieve its required internal rate of return.”

The company says it will enter the mobile market with “simplicity, quality and value” as its three main guiding principles.

Earlier this year, Telkom signed an agreement that will allow Telkom Mobile customers to roam on MTN’s second- and third-generation voice and data networks. The company now says it will offer international roaming at launch through “another established and experienced international service provider”. It declines to name the party concerned.

Telkom says it is at an “advanced stage” of negotiating interconnection agreements with other local operators.

The company will offer prepaid, postpaid and what it called “hybrid voice and data” products to the market.

It has appointed China’s Huawei to build the network and the billing support service systems.

Telkom says it is negotiating finance structures with its suppliers in an effort to reduce its capital investment in favour of operating lease-type payments, which include technology renewal.

The radio access network — the bit that connects its customers to its cellphone base stations — is all Internet Protocol based. This will allow it to deploy newer mobile technologies quickly, it says. Initially, the network will use high-speed packet access (HSPA) technology capable of theoretical download speeds of up to 14,4Mbit/s.

— Staff reporter, TechCentral