MTN rides to rescue of Telkom unit

Likely respite for ill-conceived mobile arm

SPECULATION is running high that Telkom Mobile will announce a face-saving deal with cellular operator MTN within the next few days.

Industry insiders said a joint venture deal had already been hammered out behind closed doors, involving the two operators sharing networks.

If true, this could bring welcome respite for Telkom’s illconceived mobile arm, which has been haemorrhaging money since October 2010 under the 8Ta brand.

Telkom CEO Sipho Maseko has spoken repeatedly about “derisking” Telkom’s mobile arm since he arrived a year ago, but has made no concrete moves yet. For the six months to September, Telkom Mobile had a loss of R773-million.

One of its biggest problems has been the exorbitant cost of rolling out infrastructure while at the same time trying to fight off its reputation as a bureaucratic dinosaur.

Both companies denied any deal had been struck when the rumours first surfaced last year and again earlier this month.

When contacted again this week, neither Telkom nor MTN admitted that a deal had been struck — but neither denied it.

Telkom said it was “still in discussions with various parties regarding Telkom Mobile”, and an announcement would be made when these talks had been concluded.

MTN chief technology officer Eben Albertyn said MTN SA did not comment on market speculation, but “as a normal business practice MTN engages with companies such as Telkom on matters such as roaming agreements”.

The ace up Telkom Mobile’s

There will be some form of consolidation in the industry

sleeve has always been its access to Telkom’s desirable chunk of spectrum — spectrum which Vodacom and MTN have been eyeing as a means to expand their broadband networks. Revenue from data has become an increasingly bigger market for the cellphone operators, while revenue growth from voice calls has been declining.

Access to this spectrum would give MTN a lot more capacity, and allow it to provide better quality data and voice services to customers.

Pundits say that if such a deal is done, MTN would give Telkom Mobile an “almost free” ride on its network infrastructure in return for use of the spectrum. Any additional rent from this would be “money for jam” for MTN, which has long since paid for its existing structure anyway.

Should a deal be announced, it would follow on the heels of Vodacom’s purchase of Telkom’s rival Neotel.

Cell C CEO Alan Knott-Craig has been predicting consolidation in the industry for years, although experts believe that Cell C would be the one to tie the knot with Telkom Mobile.

In November, Knott-Craig said: “In my view, there will be some form of consolidation or partnership in the industry in the near future.”

But any joint venture between MTN and Telkom would leave Cell C exposed as the smallest player. Comment on this: write to letters@businesstimes.co.za or SMS us at 33971 www.timeslive.co.za