South Africa: Post-Vodacom Telkom wants to become fifth mobile operator and focus on broadband


With the prospect of losing 40% of its annual revenue after the sale of Vodacom, Telkom is slowly turning its mind to what it will do to replace the lost income. CEO Reuben September has already indicated that it wants to become the fifth mobile operator in South Africa, although how it will do this is much less clear.

Telkom has been cagey about how it plans to offset its mobile revenue loss, as well as whether it has a concrete mobile strategy in place. In its financial results for 2008, Telkom reported Vodacom accounted for 42.8% (R24 billion) of group operating revenue and 42.9% (R6.2 billion) of group operating profit. While the company admits it is facing challenging times, it is not revealing specific details on how these income losses will be mitigated.

In effect, Telkom claims it is looking to diversify its revenue streams, as well as product and service offerings in existing and new markets. The group last week reiterated one of its “core strategic focal areas” is its “defend and grow” strategy, which aims to protect its “current business and contain the loss of market share in an increasingly competitive and changing regulatory landscape”.

“In addition, Telkom recently announced a new organisational structure, which aims to support and enable the company's future strategic direction. Part of the rationale behind the new structure is to bring a massive focus to broadband,” it says in a statement.

It adds that, in the past, Telkom had communicated the target of 20% of fixed-line telephones in service to be broadband-enabled by 2011. However, going forward, this figure could be revised upwards. “Telkom will also achieve a greater broadband penetration by expanding our mobile 3G broadband network.

“Growth and expansion, including outside of SA's borders, is another pillar in Telkom's future strategic focus. The company's recent corporate actions - such as the Vodacom-Vodafone deal, our 100% acquisition of MultiLinks (a Nigerian-based wireless network), Africa Online (which gives Telkom a widespread East African footprint) and the acquisitions of the African operations of MWeb, clearly reflect Telkom's intent.”

On the sidelines of last year's financial results presentation, CEO Reuben September explained that Telkom plans to become SA's fifth cellular provider by the middle of this year, and was preparing to enter into talks with an existing mobile operator to roam on its network. The mobile plan, he said, would involve a strategy of “selective build” to add mobile capability to its existing infrastructure, rather than build and operate its own mobile network. To date, however, the company has not revealed whether it has actually entered into talks with any local or foreign mobile providers, or how advanced these negotiations might be.