Telkom moving into mobile space

Johannesburg - Telecommunications group Telkom is planning to spend up to R6bn to launch mobile operations in SA, which include rolling out its own network and establishing a roaming agreement with either Vodacom or MTN.

CEO Reuben September said on Tuesday the money will be spent over the next five years, using GSM technology (an ageing framework used for voice and basic data connectivity by cellular networks), along with newer data standards to ensure compatibility with other networks.

"Our approach to the market as a fourth entrant has always been based on a self-built component in certain areas where we want to capture traffic, and on roaming in other areas," he said. "We've gone out to MTN and Vodacom, being the primary national backbone mobile operators, and we're in negotiations at the moment. I'm happy with the progress."

However, analysts are sceptical whether Telkom will manage to steal market share away from the other network operators.

Kaplin Equity Analysts' Irnest Kaplin said: "It's difficult to find a compelling reason why a potential mobile customer would go with Telkom. There are only two things that can really win a customer over - converged, fixed-mobile solutions and price.

"Telkom is keeping quiet, so we don't really know what they're going to do in that regard. Granted, over five years this [R6bn] is a drop in the ocean compared to what other mobile operators are spending. Some have spent that in one year."

He pointed out Telkom can't be compared to other cellular networks because the latter built their networks from scratch, while Telkom has existing network infrastructure it can leverage.

"The R6bn is a lot of money given that it's not a no-brainer. They can probably make it work, but the scope for success isn't massive, which makes spending that amount a daunting prospect."

- Fin24.com