Lengthy delays in introducing competition to the fixed-line phone market have helped bolster Telkom’s predicted earnings for 2003-04, with the monopoly predicting that a 30% rise in net income is on the cards. Telkom has made good use of the delays, clinching long-term contracts with almost 90% of its corporate customers.

This raises concerns about the ability of the planned second national phone operator to make inroads into this market. Telkom said last week that it expected to lose as much as 15% of its market to its rival, pointing out that with government holding a significant stake in the new operator, it could feel obliged to allocate a chunk of business to it.

Government and business accounted for 71% of Telkom’s revenue last year. "They (government) may feel they have to allocate some of their market to the second network operator. But we are also pursuing a defensive strategy to hold on to what we have," said Nombulelo Moholi, Telkom’s chief sales and marketing officer.

To this end, Moholi said the company had budgeted for a market loss of between 10% and 15% in the next three to five years of the second operator’s introduction to the market. Government will directly hold a 25% stake in the proposed second phone licence, and another 30% indirectly through Eskom Enterprises and Transtel.

Moholi said Telkom’s main growth areas going forward would be the doubling of internet subscribers, increasing the number of long-term contracts, and increasing synergies with 50% subsidiary Vodacom.

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