News­maker SA has to wake up to dig­i­tal re­al­ity, says Telkom’s Sipho Maseko

Telkom CEO pleads with Pretoria for more ur­gency on spec­trum

Sunday Times - - Business Times - By CHRIS BAR­RON

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

Pic­ture: Moeletsi Mabe

Telkom CEO Sipho Maseko has long im­plored the gov­ern­ment to en­able and en­cour­age the growth of the dig­i­tal econ­omy.

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