Johannesburg - Local telecoms analysts say the acquisition of Transtel Telecoms by Neotel will not position the country's second fixed-line operator to compete aggressively with state-controlled telecoms giant Telkom.
Analysts also watered down suggestions that the deal will introduce competition between Telkom and Neotel and reduce South Africa's high telecoms prices.
The Competition Tribunal this month approved a R230m transaction for the integration of Transtel Telecoms into Neotel from next month.
Transtel Telecoms was the former commercial telecommunications arm of state-controlled Transnet.
It was part of the latter's disposal strategy of non-core businesses to allow it to focus on the freight transport business.
Some analysts had predicted that the deal would position Neotel to compete more aggressively with Telkom's business offerings.
However, Dobek Pater, telecoms analyst at research and consultancy firm Africa Analysis, says the deal will not lower telecoms prices in voice and data business services. But it may enhance Neotel's metropolitan networks.
"The transaction will not necessarily promote rigorous competition between Neotel and Telkom until Neotel provides full services to the consumer market and expands its business services," he says.
'One less player'
Neotel, which is 26% owned by India's Tata Communications, had planned to roll out voice and data services to consumers in the first quarter of this year but it has since pushed the date to June.
Pater says the Transtel-Neotel deal will introduce network-based competition in the local telecoms market.
"It will allow Neotel a wider network in metropolitan areas at a lower cost. This may allow it to grow and challenge Telkom in future," he says.
Neotel has been leasing telecoms infrastructure before the deal. This includes fibre-optic networks from state-owned broadband infrastructure company, Infraco.
Neotel is no longer reliant on Infraco as Transtel has its own telecoms infrastructure, of which Neotel will make use.
Neotel acquired Transtel's infrastructure for R256m in August last year.
Transtel also brings an existing customer base to Neotel that generates about R600m revenue a year. Neotel will also benefit from a pool of more than 500 highly skilled workers at Transtel.
Genesis Analytics telecoms analyst Robert Lipschitz says the deal is a positive development that may end Telkom's local monopoly.
"The deal doesn't change the competitive landscape too drastically. What it means is that there is one less provider and one less player in the market.
In a better position
"However, Transtel has been struggling to provide efficient telecoms services on a larger scale. Its acquisition may help Neotel enter the consumer market aggressively and, in the long run, cause prices to drop," he says.
Ajay Pandey, chief executive of Neotel, has said the company will outline the roadmap of Transnet integration directly to its customers and suppliers.
Harjit Singh, principal executive officer at Neotel, concedes that the deal will not place the company in a position to challenge Telkom's monopoly. "We're still a small company compared with Telkom. We can't compete with them in terms of size but we can beat them in prices and competency stakes," he says.
He says the deal will not necessarily reduce high telecoms prices.
The deal has nothing to do with the reduction of telecoms prices.
"However, we'll use the assets and human capital we got from Transtel to entrench ourselves in the local market," he says.
Neotel's converged services, featuring high-speed internet with carrier-grade voice, were to be available commercially for consumers and small, medium and micro enterprises (SMMEs) early this year. But delays held up the launching of the services to the market.
Singh says Neotel is now in a better position to speed up the launch of telecoms services to consumers and SMMEs because Transtel has been providing services to the SMME sector.
- City Press