Telkom jumps on mobile bandwagon

Telkom has joined the cellphone giants and launched a mobile-communications business to offset falling profit from its fixed-line operation.

Telkom launched its cellular network at Lanseria international airport, north of Johannesburg, last night.

The parastatal's core fixed-line business reportedly came under pressure after it spun off and sold its stake in Vodacom, South Africa's biggest cell network operator and Telkom's main earnings driver.

It has been reported that Telkom intends spending R6-billion over the next five years to launch a cellphone business as profits from its fixed-line business tumble.

The move has been met with mixed feelings by analysts, some saying Telkom will have a tough job persuading customers to join its network.

Fezekile Mashinini, a telecoms analyst from BMI Techknowledge, said Telkom's launch would offer a total solution to customers.

"It is in this understanding that operators like Vodacom have launched Vodacom Business, which offers predominantly fixed-line-based services.

"Telkom needs to do the opposite to stem the continuing tide of migration from fixed to mobile network usage," he said.

Mashinini said Telkom was likely to survive in a competitive environment that already had Vodacom, MTN, Cell-C and Virgin Mobile, due to its "high brand share and millions of existing customers".

But he cautioned that "it will definitely not be easy for Telkom to break into the market, but they have the customer base to offer converged services ... we can only hold our breath and wait to see what prices they will offer their services at."

John Farquhar, the founder of Marketingweb, said Telkom was faced with "more problems ahead".

"With a reputation that has been damaged through poor service, Telkom will have a tough job persuading consumers, and the corporate world, that it is now sincere about mending the broken promises of the past, and that service and quality will be its watchwords from now on," said Farquhar.

"The mobile market is probably saturated and [Telkom] will find it tough to attract consumers.

"Price will play a huge role in this gamble," he said.

Farquhar said Telkom historically had a bad record in venturing into foreign territory in the past two decades.

"It ventured into Nigeria and lost billions before retreating. In contrast, MTN moved into that country and did well.

"[Telkom] employed people at astronomical salaries . and eventually sold [the Nigerian business] at a giveaway price to the Chinese."