Telcos must target corporates

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 09 Mar 2009

Telecommunications businesses need to start aggressively targeting the corporate market, as the consumer market is becoming increasingly saturated.

According to telecoms investment firm Delta Partners, the coming year will see mobile providers and alternative telecoms players waking up to the corporate opportunity.

While Telkom and, to a far smaller extent, Neotel, have a firm grip on the corporate customer, there are still opportunities in the space for other players, particularly cellular, explains Kristoff Puelinckx, managing partner of Delta Partners.

He sees competition in the enterprise space hotting up in 2009. “This year, the operators will fight it out over the corporate customer,” he adds.

However, Delta Partners says the mobile operators, specifically MTN and Vodacom, will have difficulty in growing corporate business through mobile. One of the investment company's predictions for the year is that “MTN and Vodacom will continue to compete in corporate services, but will find difficulty in materialising synergies with the mobile business due to organisational and commercial differences”.

While the local corporate market is a seemingly good opportunity for local players, Puelinckx expects that increased international capacity will provide an in for international businesses to take advantage of the same space.

International capacity has led to the increased drive to provide local capacity, with Vodacom, MTN and Neotel all building national backbones in fibre. According to Puelinckx, this will provide local telcos with a new revenue stream, previously only held by Telkom. “The fibre networks will provide the telcos with a new wholesale business.'

However, the future of telecoms this year will not be bright for all the players. The company has taken the opinion of many South African telecoms analysts, concluding there will be significant consolidation and acquisition this year. “The businesses that survive will be those which are able to transform their current business models and adapt not only to a changing economic environment, but to increasing end-user demands.”

What's to come

Delta Partners released a white paper detailing its predictions for the industry in 2009. Its top predictions for the year are:

* An international player may enter the mobile market via acquisition or a new licence.
* Telecom infrastructure sharing will increase across SA (such as towers and sites, backbone fibre, submarine cables).
* Telkom's nomadic W-CDMA offer will struggle to achieve significant results.
* Telkom will struggle to implement a clear strategy and investors may lose patience as margins further decline, making itself a target for acquisition once again.
* Several value-added network service providers (now electronic communication network service providers) will be forced to sell or merge as they will lack the cash to make necessary capital investments.
* Several service providers will be eliminated, as their contracts will not be renewed.