war at home

http://www.itweb.co.za/sections/telecoms/2008/0803141050.asp

[Johannesburg, 14 March 2008] - While Telkom expects to lose 10% to 15% of fixed-line market share in the medium-term, the telecommunications incumbent says it is rallying a defence against competition from new entrants.

The fixed-line operator says it will increase capacity on its national core bandwidth by 1 000% and its metro layer core bandwidth by 1 600% in two years.

Earlier this week, MTN Network Solutions CEO Mike Brierley predicted Telkom would lose fixed-line market share in 2008 due to competition from MTN, Vodacom and Neotel. He also noted competition in metro fibre networks is strong.

Value-added network service providers, which will motivate to the Independent Communications Authority of SA next week to be allowed to roll-out national infrastructure, will add another layer to Telkom's competition in that arena.

MarketWorks business advisor Steve Edwards says: “I could give you practically any figure by way of prediction of Telkom's market haemorrhage over any particular period. But I think you can expect it to be large, given the company's own perception of threat, to the extent of trying to reinvent itself as an ICT company.”

Telkom's interim financial statements for the six months ended 30 September outline its potential threats and its “defend and grow strategy”.

It reveals that during that period, Telkom's national network increased by 167 nodes, with a bandwidth potential to increase by 17%. Moves were also under way to add more nodes and increase bandwidth potential by 47% for the next 12 months and 52 Metro Ethernet sites were rolled out in Western Cape and Gauteng to carry traffic, it says.

These activities were part of Telkom's move to build a next-generation network, the report says.

Own fault

However, Edwards blames Telkom for putting itself in a position where it could lose out to fixed-line challengers.

“Even if the cellular operators and their cohorts had stayed out of the fixed-line voice and data spaces, Telkom would continue to lose market share,” he says.

“Thanks to Telkom's internal inefficiencies, coupled with their mandatory social service obligations, they are not as light on their feet as any of their competitors. Also, having set pricing so high in their halcyon days of total monopoly, they have enabled their competitors to make relatively easy money out of even new, expensive infrastructure – however much the competitors like to squeal about anticompetitive behaviour.”

Telkom's “anticompetitive abuse” of its fixed-line infrastructure monopoly also set market expectations for data services as slow and expensive, he says. The result is that just about anything its competitors do looks like a service improvement or cost reduction and wins them credibility points, he adds.

“It's ironic, really, because Telkom's ADSL offering remains the most reliable, consistent and, effectively, the cheapest in that particular segment. That is, when you can find an exchange that can provide it, or a lackey that understands the importance of getting it installed really quickly,” he says.

Winners and losers

While Vodacom Business will not make a significant impact in the first part of this year, there will be activity from the company in the latter part of 2008, says Brierley.

“Vodacom is a significant company with significant resources. We obviously can't ignore them. But we're certainly not going to lie down and play dead.”

Edwards sees MTN winning Telkom's lost market share because it already holds significant market share, is aggressive enough, and has better service delivery and operational performance when compared to Vodacom.

“If they can just work some pricing magic, the day will be theirs. Neotel is too sleepy to make much of the opportunity in the short-term, though they and Vodacom will add to Telkom's misery once MTN has cleaned up,” says Edwards.

http://www.itweb.co.za/sections/business/2008/0803201100.asp

[Johannesburg, 20 March 2008] - The integration of Transtel into Neotel begins on 1 April, following yesterday's approval of the R230 million transaction by the Competition Tribunal, says Neotel spokesman Fani Zulu.

Neotel first announced its plans to acquire Transtel as a going concern in April last year. The acquisition allows Neotel to compete more aggressively with Telkom in the enterprise space.

“Neotel views the acquisition of Transtel as a strategic move to address a broader enterprise market. Transtel, with over 100 locations nationwide, will enable Neotel to deliver and support telecommunications services to address this market sooner than otherwise possible,” says Neotel MD and CEO Ajay Pandey in a media statement.

The acquisition also gives Neotel faster entry into the enterprise markets, and provides it with a platform to introduce its next-generation services for businesses, he says.

Transtel also brings an existing customer base, which is said to generate in excess of R600 million per annum, he adds.

One of the customers is Transtel's former holding company Transnet, which has told the Competition Tribunal that it intends to appoint Neotel as the sole and exclusive provider of electronic communications services to Transnet for a period of five years.

Integration roadmap

Pandey says Neotel will, over the next month, contact Transtel customers, suppliers and other associates directly to communicate how the transaction affects them.

Zulu says one of the major tasks will be to integrate Transtel's network into Neotel's next-generation network (NGN).

This includes “some level of investment” to upgrade the Transtel network and enable smooth and efficient connectivity with the NGN, he says.

It is unlikely that Transtel customers will be heavily impacted by the transaction, as the company will remain a subsidiary of Neotel, and not be swallowed up as part of the integration process, he says.

“Transtel customers will remain clients of that company, with the added benefit of gaining access to Neotel's NGN,” he says.

There will be no job losses as a result of the alignment of the companies' business processes, as some of the 550 Transtel employees have scarce skills that Neotel needs, he says.

“Neotel currently employs 20 to 30 new people per month and there is work to be done.”

Gaining traction

Zulu notes that Neotel has become a significant player in the enterprise market since it launched its offering in November last year.

Neotel has signed a number of blue-chip companies, and is seeing a lot of repeat business and clients taking on additional services, he says. Business revenue is also growing and new solutions are being added, he says.

The company is also moving at a brisk pace with its fibre roll-out, having already covered Sandton, Rosebank, downtown Johannesburg, downtown Pretoria, Cape Town and Durban. Companies that want fibre can effectively get it within 72 hours, he says.

“Those fibre roll-out plans that you usually see on PowerPoint presentations have become reality for Neotel,” he adds.