Johannesburg - With the second network operator (SNO) launching its operations later this week, Telkom said that it was ready for a price war but cautioned that such an occurrence would not be in the best interests of the two companies.
Addressing a Finweek magazine breakfast briefing on Friday, Telkom chief executive Papi Molotsane said there would always be an endeavour on the part of his company to reduce prices of services to consumers.
Molotsane said if a price war does materialise, his company was ready. He said that, with the coming into operation of the SNO and competition from various telecommunications service operators, Telkom was factoring in a possibility of losing between 10% and 15% of its market share.
"We expect our margins to come under pressure," he said.
Molotsane said Telkom was also concerned about the possibility of the SNO luring its skills force.
Head hunting
He anticipates a "wage war" to dominate the telecommunications sector.
Molotsane, one year at the throne since his appointment last September, said the past year had been one of challenges which had seen Telkom formulating and implementing a new strategy.
He said Telkom's future focus would be to deal with new technological challenges, competition issues and value-added services to improve customer service.
Legislation was changing and providing an enabling atmosphere, he said, and this would provide the company with an opportunity to look into areas where it had previously not been involved.
He said Telkom had analysed the sector and looked at its balance sheet, its strengths, resources and experiences globally.
He also said Telkom was ready to venture into new business opportunities especially in data services.
R76bn company
"Our industry is evolving from fixed line telecommunications to an industry that offers more mobile telecommunications, including media services," he said, adding that convergence between the telecommunications industry and information technology presented new opportunities.
To realise its objectives Telkom management was pushing ahead with its five-year R30bn capital expenditure programme, Molotsane said.
Since its partial listing in 2003, Telkom had grown to become a R76bn company in terms of market capitalisation. It is the 20th largest company on the JSE.
Molotsane said Telkom's progressive dividend policy, including investment into the business, would continue.
He said expansion through acquisitions and growth outside SA borders into the African continent and beyond would be pursued with vigour, adding that Telkom would be focusing on fixed and mobile operations.
Some of the markets it was targeting to expand business are Nigeria, Kenya, Democratic Republic of Congo and Angola.
Turning to projects and service ofering, he said that over the next 15 months Telkom would be launching a project to improve provision of the asymmetrical digital subscriber line (ADSL), a broadband access standard which uses copper lines to offer high-speed digital connections.
Lower costs of doing business
He said in the new business model Telkom wants to deliver ADSL connections within 14 days.
He said Telkom would continue to invest in its infrastructure and pay attention to its tariff structure in a drive to lower the costs of doing business.
He said over the past year the company had managed to reduce its costs across the board by an average of 22.1%.
Molotsane said Telkom would work with the government to help develop the business outsourcing industry and devise competitive tariffs for it.
He said currently Telkom's voice business accounts for 80% of revenue with data contributing 20%. He said the goal was to increase data contribution over time to 60%.
As with all major parastatals, Molotsane said Telkom was working on addressing obstacles that lie ahead in its bid to deliver on a successful 2010 Soccer World Cup.
Telkom will be a key player in delivering communications solutions during the four-yearly soccer tournament.