Telkom CEO Sizwe Nxasana is resigned to the fact that a large portion of the business market, and especially large data-users, will switch to the yet to be introduced competing operator.
"We expect to lose 15% of the corporate market in three to five years after competition," he told the Gordon Institute of Business Science Forum last night.
Nxasana said the "perception that Telkom is expensive" almost guarantees a loss of customers.
He also confirmed the Telkom position that it has made no decision on whether to apply for its optional further year of exclusivity, which will extend its monopoly to May 2003. Telkom expects to be eligible for the extension, he said, and will not be pressured by government when a decision is made.
"There are certain people in government that are confused as to what the reality is of what the licence says. They are pre-empting what will happen.
"We have an asset, and the asset is our option," he said. The Telkom licence contains an incentive of line roll-out targets which, if reached, opens the option for Telkom to apply for an extension of up to one year.
Nxasana said the decision, which will only be made towards the end of 2001, will be swayed by the effectiveness of the new regulator, the Independent Communications Authority of South Africa (the successor to the SA Telecommunications Regulatory Authority he described as "totally ineffective").
"It depends on whether there will be clarity in the regulatory environment. If the environment is not clear we may exercise our right."
One reason for not applying for the extension is the price regulation Telkom is bound to under its exclusivity. Reacting to a question on price reduction after liberalisation, Nxasana said Telkom could offer different tariff structures that would make pricing very attractive to customers.
"It is all a question of packaging at the end of the day." He noted that the current regime does not allow Telkom to exploit its relationship with Vodacom, of which it owns 50%.
Reuben September, Telkom`s executive of technology and network services, said it would be "an enormous challenge" for any competitor to duplicate current national infrastructure if competition is infrastructure-based.
According to September, Telkom can provide almost any customer with a 2.5 GB circuit, and will soon introduce commercial 2MB point-to-multipoint wireless broadcasting. There are also 3 600 operational high-data-rate digital subscriber lines and a trail of asynchronous digital subscriber lines that are currently underway
"We can provide big fat pipes to any of our customers," he says.
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