Telkom steps up to operators

The goal of supplying a Telkom-branded cellphone service is moving closer, with Telkom erecting wireless base stations and negotiating with the existing players to roam on one of their networks in areas where it is not cost-effective to build its own.

“Being only a fixed-line business was never going to take Telkom into the future,” Telkom CEO Reuben September said Wednesday, 1 April 2009.

“Growth is in mobility.”

Package deals

The service would be easier to launch if Telkom just wanted to sell a stand-alone mobile offering, but the aim was to offer a package including fixed-line and broadband internet access, he said. “We don't necessarily want to replicate the other mobile operators because I don't think we will win the game if it's only about replication.

“It's about the strength of the fixed line combined with mobility and offering a value proposition.”

The target market would be corporate customers and high-end residential areas, but Telkom would not ignore high-density townships, September said.

Telkom will not build a national wireless network to rival the other players, but will build in high density areas, and augment that with a roaming deal.

That will see it co-operate as well as compete with its rivals, with September openly declaring: “We want to move traffic over to our networks.”

Risky business

Analyst Rudolph Muller of MyBroadband.co.za has already tested the service using a Nokia phone and a Telkom SIM card.

“It's debatable whether it will be successful,” he said.

“The trouble will come in finding a suitable partnership with MTN or Vodacom because it will depend highly on the prices.

“I'm not sure it can be significantly cheaper than Vodacom or MTN if Telkom is paying to roam on their networks.”

He said that because the value proposition of competing head-on with Vodacom and MTN was not that high, Telkom's ultimate goal was to let people buy a data package and voice minutes, and use them on their fixed or mobile phones and pay for it all on one bill.

Another challenge for Telkom was to boost its sales and distribution capacity to market the new offerings.

September said: “We will be offering mobile phones from Telkom, but our current channel to the market needs to be increased, whether it's a Telkom Direct store, a franchise operation or another outlet where you buy a phone and connect to Telkom's networks.”

Lessons from the beaten path

That lesson has been learned from Cell C and Virgin Mobile, as a lack of retail outlets has dented their effect.

An additional challenge for Telkom is to beef up its technical skills as it has no experience in the mobile niche.

It has commissioned research to see if consumers would be happy with a cellphone that worked only in limited areas, such as in their home cities.

A local service could be carried entirely on Telkom's infrastructure, although the roaming deal with an existing network would extend the coverage nationally.

Source: Business Day

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