Telkom waves goodbye to wireline monopoly

2 Feb 2005

South Africa’s dominant telecoms operator Telkom has finally lost its monopoly in the fixed line market. Although the first signs of competition appeared in 2002 with the award of a number of international and business services concessions, alternative operators have so far made little progress. One of the main factors in Telkom’s continued dominance has been the government’s failure to push through its promised launch of a second network operator (SNO). The government announced last week that problems surrounding the ownership of the SNO – with a 26% stake still to be allocated – will be resolved later this year.

The legislation which came into force yesterday enables private telcos to offer a full range of wireline services. Companies such as the state-owned broadcast network operator Sentech and Transtel, a subsidiary of the national rail operator Transnet, have already launched telecoms networks, with Transtel claiming to own the largest telecoms network in the southern hemisphere after Telkom.

South Africa’s telecoms regulator Icasa expects the liberalisation of fixed networks to also have knock-on effects for cellular customers, with a possible reduction in prices. Mobile operators are now free to either construct their own fixed transmission networks to connect their base stations or lease capacity on networks other than those of Telkom, with any cost savings likely to be passed on to the consumer. However, any changes will take time so mobile users should not expect to see smaller bills in the short term.

Icasa has clarified that virtual network operators will not be able to install their own fixed links to customer premises, although most value added service providers would no doubt have opted to lease lines from Telkom anyway rather than going to the expense of rolling out their own local loop infrastructure. Telkom has been ramping up its own broadband portfolio in preparation for the introduction of competition, and plans to spend ZAR4.2 billion in the current financial year on its broadband networks, which include high speed wireless links to bring internet connectivity to remote areas. The firm’s CEO, Sizwe Nxasana, told Johannesburg newspaper Business Day: ‘This is a challenging situation, but we are confident Telkom is indeed ready to compete.’