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Vodacom vs Telkom2007-06-18 Vodacom declared war on parent company Telkom when it announced plans to tackle the fixed-line monopoly head-on by rolling out its own fibre and wireless networks, and launching an internet service provider. The infrastructure roll-out is a precursor to Vodacom challenging Telkom's established revenue streams in the provision of fixed-line and converged solutions to corporates. This follows recent developments where Vodacom signalled its intention to take on Telkom in the Pay-TV markets with its exclusive DStv deal, where it on-sells a smaller 16-channel bouquet for R139 a month, targeting the lower-income market. Vodacom also has been flexing its muscles in the broadband market with competitive HSDPA and iBurst offerings. Telkom secured a 10% stake in iBurst's parent company, WBS, last year, in a bid to get its hands on the valuable Wi-Max spectrum, which it will use to roll out a Wi-Max network by the end of the year. Wi-Max is a second-generation wireless network. Vodacom holds an option for a further 15,5% stake in WBS. Vodacom's partnership with DStv is in direct competition with Telkom's content arm, Telkom Media, which plans to launch a Pay-TV offering; and Vodacom's partnership with iBurst has made it possible for it to offer a desktop broadband alternative to Telkom's ADSL packages. This conflict has led to market speculation that Telkom would consider offloading its 50% share in Vodacom and look to entering the mobile market through another avenue. However, the issue was sidestepped by Telkom's acting CEO, Reuben September, at the company's annual results announcement this week. September said Telkom was busy with a review of its mobile strategy and, because this process was incomplete, he would not comment on speculation that Telkom could sell. With Vodacom expected to announce a mooted R7,5-billion BEE deal before the end of the year, which would dilute Telkom's shareholding, it could make sense for Telkom to sell before it loses joint control of the mobile operator. Telkom's 50% share in Vodacom was recently valued at R75-billion by Citigroup, with Telkom's total market capitalisation sitting at R97,4-billion. Vodacom CEO Alan Knott-Craig told a packed audience at its annual resultsannouncement that Vodacom would be rolling out Wi-Max infrastructure and fibre network rings in South African cities in an attempt to self-provide its entire network. Knott-Craig (left) said the move would deal with current capacity shortages in voice and data transmission and allow Vodacom access to better prices. "For us to shy away from it [rolling out a fibre network] just because it was a fixed-line area that no one touched would be shortsighted," said Knott-Craig. "The emerging international trend is for mobile companies to start doing their own thing in that space." "We continue to have a good relationship with Telkom," said Knott-Craig, "But the days of mobile and fixed not getting into each other's territory are over." September said Telkom was still happy to be the underlying infrastructure provider, but he did not comment beyond that. Russel Southwood, from ICT website Balancing Act, said the larger mobile operators have become the new incumbents that would look at different ways to dominate the emerging converged landscape. Rudolph Muller, from broadband activist group MyADSL, said that Vodacom is moving toward becoming a true converged telecoms company and that all telecoms companies are looking at content as an additional revenue stream. Genesis Analytics telecoms analyst Robbie Lipschitz said many analysts were predicting that content is where the real value in the market is going to come from and that a large network means there are more customers you can push content and services to. "What we will see and are already starting to see is that Vodacom will be competing directly with Telkom," says Muller. "It is quite strange that this partly-owned Telkom company will become one of its fiercest competitors." The importance of a large customer base and network infrastructure can be seen in the recent announcement of a R49-a-month iBurst wireless broadband offering. This offering aims to get current dial-up users on to the bottom rung of the broadband ladder, and doubles as an effective way of buying access to consumers' homes. Telkom is currently in a very strong position in the converging telecoms market because the company has a fibre network that allows it to deliver its services straight to the consumer's home. For other operators to roll out a similar network they would need serious capital for appropriate infrastructure. In the last year, Telkom has almost doubled its fibre-optic network capacity. Although the margins on a R49 broadband offering may be low, iBurst and Vodacom have effectively bought access into the consumer's home through the iBurst modem, and this could be exploited at a later stage to push content and additional services to the consumer. Muller described the R49 iBurst offering as a sly marketing trick aimed at getting the iBurst modem into people's homes. Telecoms analyst Mike Jensen says he agrees the moves are all about securing direct access to the market and that, internationally, some operators had given away free Wi-fi routers in a bid to secure cheap infrastructure to deliver services to customers. "I think the point is to secure as many customers as possible," says Southwood. Regardless of how operators are reaching customers, the battle between Vodacom and Telkom to become the most successful converged telecoms operator is well and truly under way. Source: My Broadband |
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