Telkom obliged to cut wholesale broadband prices by 30%; network overhaul halted by legal action

4 Apr 2012

Telkom South Africa, the country’s fixed line incumbent, has been ordered to cut the price of the wholesale broadband product used by all of the nation’s internet service providers (ISPs) by 30%, Bloomberg reports. The order, which was implemented by the Independent Communications Authority of South Africa (ICASA), took effect on 1 April, the regulator said. However, it remains unclear if the 30% figure will be reached via a glide path, or whether ISPs and end-users will see the full benefit passed on immediately. The cost of the wholesale product, branded ‘IPConnect’, is currently the single largest cost component facing competing ISPs. Sean Nourse, executive for connectivity at Internet Solutions, told TechCentral: ‘Hopefully it is good for everyone. We’ve long thought [IP Connect] is the crippler to getting the whole of South Africa connected. If you look at the Telkom user base, it hasn’t grown dramatically like those of the GSM providers and we’ve always felt it was because of the price. Now we can create competitive pricing, which should also help [Telkom] grow its subscriber base.’

In other news, Reuters Africa reports that Telkom has been forced to halt a planned ZAR13 billion (USD1.69 billion) network overhaul, after infrastructure provider ZTE Mzansi won a court order on Friday to delay the project. ZTE Mzansi, a joint venture between China’s ZTE Corporation and a number of local black-owned companies, took Telkom to court after being disqualified from bidding for the project; ZTE Mzansi claimed that its elimination from the bidding process was unlawful. Pending the outcome of the dispute resolution process, Telkom is prevented from implementing the tender and concluding any service level agreement with the other bidders. MyBroadband.co.za reports that the telco is confident that it will win the legal battle, but has expressed concerned at the recent trend of challenging the award of key tenders in court. Telkom CEO Nombulelo Moholi commented: ‘This often has serious consequences for customers by stalling rollout plans unnecessarily. It is Telkom’s Procurement Policy and Procedures that are on trial here. I am confident that they will not be found wanting. Telkom is often considered to be fair game by losing bidders who may feel entitled to be awarded business by the company. We are often taken to court on review without any foundation whatsoever. Whilst one has rights to challenge administrative actions, unfortunately, the loser in this case is the end-user – our customers – who have to wait for months on end, and sometimes even years, to receive quality service. Meanwhile, Telkom will undoubtedly be accused of poor or late execution of network solutions to the advantage of our competitors.’

South Africa, Telkom South Africa, ZTE