Our survival rests on convergence

DEBATES in the telecoms industry fall into three categories: what is good for consumers, good for business, and good for the country. And, while companies struggle to get a grip on the debate, what you have as a backdrop is heightened competition, increasing demand from consumers and pressure from the regulator, Icasa, to make communication more affordable.

For companies such as Telkom, this creates an environment of opportunity — as well as big challenges.

This has led to different responses from companies.

Some of us, like Telkom, are trying to reposition ourselves to weather the storm by differentiating our service and competing on more than simply price. It is all about long-term survival. Companies are becoming more efficient. For us, it means not just cutting costs, but also ensuring that networks are occupied to the fullest extent without compromising customers.

South Africa isn’t alone in this; internationally, we see companies operating in an entirely different paradigm to a decade ago, using partnerships and new technologies. Take a look at Google, Microsoft, Apple and Amazon, which have all done landscape-changing partnership deals in recent months.

At home, my company, Telkom, and our rival. Vodacom, have announced major deals to build on the “convergence strategy”.

Our proposed purchase of Business Connexion, we at Telkom believe, will allow us to expand our existing offerings, add scale in IT services and reinforce our core connectivity business.

This is part of convergence, so you can expect more of these sorts of deals across the board.

Telkom, like fixed-line companies the world over, is struggling to keep up with mobile rivals. People are using their cellphones for calls and text messages, which means fixedline firms are seeing their revenues being eroded.

How should a company respond to this?

Well, your only option is to transform, improving performance and becoming more efficient.

Cutting costs is obviously one way to go, but you also have to form alliances to share the risks of newer technologies.

Innovation, as we’ve seen in this space, is really the cornerstone of success.

Broadband is crucial. Consumers want faster speed and more bandwidth for all kinds of things from commerce to gaming, video and music. And they want it as cheaply as possible.

The problem is that investing in broadband is expensive.

Companies that have existing networks but are short of capital need to form partnerships to grow — which is pretty much what we’ve seen with Vodacom’s plan to buy Neotel.

At Telkom, we recently did a deal with MTN to share its radio access network. This will allow us to expand our footprint while constantly updating technology and infrastructure.

In South Africa, of course, there is an extra challenge: making broadband available to rural communities who don’t have access to fixed lines.

Here, the government and the private sector must work together to improve things such as health, education and other government services. So, if the government invests in providing services to these areas, private companies can build the networks.

With all these balls in the air, where is the industry going?

Well, the telecoms sector will grow, new business models will emerge and consumers will be better off.

But Icasa has to be vigilant to ensure that consumers benefit. This is not least because the regulator decides how the spectrum is used, and the way this spectrum is divided will be crucial in determining how successfully broadband is rolled out across South Africa.

Customers will be the winners. The lower cellphone prices we’ve seen as MTN, Vodacom, Cell C and Telkom Mobile have repeatedly undercut each other are filtering through.

Broadband, too, costs a lot less now than it used to — and it’s a lot quicker than it used to be.

Maseko is CEO of Telkom