Telkom hopes to break into the lucrative northern African market by setting up an Internet hub in London, England.
The South African Internet Exchange (SAIX), Telkom's wholesale Internet service provider, announced plans to set up a hub in London to service operators and ISPs in northern Africa. Analysts see this move as a part of Telkom's broader "defend and grow" strategy, whereby the national operator seeks to invest in the ever growing African telecoms market.
Earlier this year, Telkom CEO Reuben September announced plans for Telkom to expand in Africa by acquiring opportunities in emerging ICT markets. Telkom hoped to acquire a business outside SA in order to provide "offshore security".
IDC telecoms analyst, Richard Hurst, says the countries SAIX would be looking at include: Morocco, Egypt, Tunisia, Algeria and Libya. He says a country like Morocco has more than three million fixed-line and broadband Internet users. "They have a massive appetite for information."
Until now Telkom's expansion into Africa has been through Multi-Links, a Nigeria-based fixed-line operator in which Telkom has a 75% stake, and Africa Online, a Kenya-based ISP that Telkom acquired in 2007. Hurst believes Telkom would be able to tap into the burgeoning Nigerian market through the London hub.
The new hub would also be a way for Telkom to sneak into African markets while trying to let go of its 50% share of Vodacom. September stated that Telkom would like to "liberalise" its shareholding structure so that it could pursue other opportunities in the continent. Telkom's stake in Vodacom is seen as the impasse that is preventing the national carrier from competing against Vodafone, which has interests in several African markets.
A boost for business
BMI-T managing director Denis Smit believes the Internet hub could be a huge benefit for South African businesses. Both Smit and Hurst concur that the Internet hub would help ease Internet traffic by connecting South African companies directly to northern African companies.
"I think that many companies can benefit from this," Smit says. "With Internet traffic as it is, companies would at least get some reprieve by being directly connected to opportunities and other companies in northern Africa."
Smit says that Telkom will probably target most countries in northern Africa with specific products for each. He added that the countries would be charged different rates for the service as opposed to what South African ISPs pay.
"SAIX would have to charge them competitive rates in order to 'survive' against the cheap rates the European firms offer," says Smit. Yet the analyst ruled out any reduction in the Internet rates South African business pay, saying that would be "wishful thinking".
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