Newsmaker SA has to wake up to digital reality, says Telkom’s Sipho Maseko
Telkom CEO pleads with Pretoria for more urgency on spectrum
South Africa is woefully unprepared for the fourth industrial revolution, says Telkom boss Sipho Maseko.
“The fourth industrial revolution is going to happen. The worst crime we can commit is to be unprepared.”
The government has been dithering for 10 years over the allocation of the desperately needed high-demand spectrum necessary for building even the 4G networks, never mind the next-generation 5G technology, essential for participation in the fourth industrial revolution.
Maseko, 49, who in his five years at the helm of Telkom has transformed it into an increasingly competitive player in the telecommunications market, says the latest figures showing a 2.2% decline in the economy should galvanise the government, regulators, industry and civil society into action.
He took out a full-page advertisement in the Sunday Times two weeks ago appealing to political leaders to wake up and smell the coffee.
He addressed them last year “imploring them to think about the role that digital will have in the economy”, and felt they needed “a reminder of that conversation”, he says.
“When I see GDP stats of a 2.2% decline it says to me we should be having this conversation a lot faster in terms of what are we going to do.”
Spectrum allocation is at the heart of unlocking value across all sectors in the digital economy, he says.
But his plea for action has been met with scepticism by those who say that Telkom’s submission to the Department of Telecommunications and Postal Services in March about how this should be done was less about unlocking value than ensuring that new spectrum allocation does not go to its main competitors, Vodacom and MTN.
The wireless open access network (WOAN) he is supporting would lead to a new infrastructure monopoly that would hinder competition and innovation, harm the industry and ultimately be more expensive for end users, say critics.
“Not necessarily,” Maseko says.
All he’s saying is that existing infrastructure that benefits the entrenched giants dominating the market, Vodacom and MTN, needs to be shared “so that operators can compete on value-added services”.
Infrastructure such as fibre must be shared by everyone, “so all of us can compete on services on top of that infrastructure, not on the basis that we own that infrastructure”.
He is not saying his competitors should be denied access to additional spectrum.
“I am arguing that they can’t get more of what they already have. Spectrum allocation must be designed to encourage competition. Whatever they don’t have they should be entitled to compete for and get.”
It has been argued that putting sought-after spectrum into a WOAN — as current government policy envisages and Telkom supports — will discourage competition, investment and innovation.
Instead, it will create a wholesale network inefficiently hogging spectrum dished out to connected cronies such as Telkom, of which the government owns more than 40%.
Maseko says he is not backing this because it would favour Telkom but because it is current government policy.
“Personally, I’m not a big fan of WOAN.” While he understands the logic, which is to reduce the duplication of infrastructure, he doubts the government has the ability to deliver on such a big project quickly enough.
“Look at Eskom,” he says. “You need to have a core capability of people who can execute on these sorts of things, and we are stretched as a country.”
His first choice would be to have spectrum allocated through an administrative process according to a set of criteria “such as, if you already have certain bands you can’t have more of it”.
But capacity constraints aside, he thinks going with current government policy, that is, WOAN, is the quickest way forward.
The Independent Communications Authority of South Africa (Icasa) favours auctioning the spectrum, but Maseko says this will entrench the dominance of Vodacom and MTN, which own 90% of the market and is why they support it, too.
“It will favour the highest bidder,” says Maseko. “Themselves.”
The government has brought a court action to prevent Icasa going ahead, and the matter remains unresolved.
Maseko has been accused of wanting to ride on the coat-tails of the Vodacom and MTN networks.
“We don’t want to ride on their coat-tails, but if you’re thinking forward 20 or 30 years, you want capital efficiency, competition and prices to come down.”
This won’t happen if the space continues to be dominated by the current “duopoly”, he says.
He says too many government departments and entities have been involved in the spectrum decision, and too little expertise.
“We’ve got a complex policy and regulatory system which is getting in the way.
“But we need to snap out of our slumber.” He says the country needs “a massive digital economy summit” to ensure that whatever decisions and investments are made are fit for purpose.
Otherwise, the same mistake will be made as in 1995-96, he says, when Telkom “wrote off R1-billion after it was made to deploy a million telephone lines at a time when the world was going mobile”.
He says: “We solved a historical problem when we should have been solving a future problem.”
Full-year results released by Telkom last month showed that although it was generating good cash from its mobile services, its after-tax profit fell 19%.
Maseko blames this on the effects on his clients of policy and regulatory uncertainty, and a weak economy.
“When companies begin to defer spending, I feel it first — as happened when the Mining Charter was released last year and big mines that were looking to expand immediately deferred committed contracts saying there was too much uncertainty.”
Telkom’s share price took an 18% knock after the government’s “amateurish” announcement last year that it was looking to sell its shares to fund SAA.
“That was a disaster,” says Maseko. Although the government clarified that Telkom was “off the chopping block”, its share price hasn’t recovered much.
“It takes a while to build confidence, and it takes a second to destroy confidence,” he says.
We’ve got a complex policy and regulatory system, which is getting in the way. But we need to snap out of our slumber
Telkom CEO Sipho Maseko has long implored the government to enable and encourage the growth of the digital economy.