Love them or hate them, but the big bank deregulation of the telecommunications industry announced recently by communications minister Ivy Matsepe-Casaburri is not going to mean a massive market loss for the Telkom juggernaut, or an overnight plummet in prices for businesses and the consumer, said Christopher Riley, CEO of Pretoria-based notebook and accessories retailer, The Notebook Company.
"Telkom still recently posted stellar financial results and admitted with the deregulation that they will lose 10% of market share. But they also believe that the market, as a whole, will grow by at least that much as well.
"It mustn`t be forgotten that, currently, Telkom literally owns the market. It has a massive investment in its infrastructure, has lots of cash in the bank for a war chest, has managed improved customer service, and is planning to spend R4 billion in upgrading and expanding its infrastructure, also to take advantage of the VOIP and wireless communications markets - two markets that are expected to boom when the deregulation comes into affect on 1 February."
Riley said that even with the second national operator been given the green light, this doesn`t mean Telkom`s clients will "desert the former monopoly like lemmings".
"It is unlikely that big insurance companies and financial institutions are going to simply jump ship. These are ponderous companies with a conservative edge who understand that they cannot disrupt the systems they have in place, especially the core way they communicate. If they are experiencing a reliable service from Telkom, why would they risk this by moving to another supplier just to save a few bucks?
"The man-in-the-street - the general consumer - may switch just to get cheaper prices, but it is unlikely big institutions are going to take chances. They will stand back and watch and, if Telkom plays its cards right, they may not lose much market share at all. Even if they happen to lose 10% of their current market share, but gain a bit of the additional market size that is anticipated, what do they really lose?
"Telkom`s service levels, in the past, were often dreadful. But in terms of world standards, most corporates will tell you that the company`s service levels are now acceptable. Companies like Sentech have betted the family farm on making a big impact on the wireless market. But with the sudden deregulation announcement, where does that leave them? There have been questions asked, already, about the reliability of their solution, MyWireless. They have not had the time to build up a big client base or a branding. Now that the market is going to open up, they don`t have much time to make an impact on the market - and they are going to face a lot of sudden and aggressive competition from all quarters. They have an uphill battle ahead of them, just to pay back the debt they have built up to get their infrastructure and services off the ground. The whole market has shifted and, rather than wondering what is going to happen to Telkom, market watchers should wonder who are going to be the new stars in the new local telecommunications industry.
"Would-be pretenders to the Telkom throne should realise it is not just Telkom they are going to compete against in order to win market share, they are going to have to fend off threats from some serious players who already have their toe in the market - as well as from a plethora of fly-by-nights who are going to try and make a quick buck simply by offering dirt cheap services that just won`t fly. But, initially at least, these fly-by-nights could create financial headaches for those companies who are hoping to become ethical and serious long-term players in the new market. Those saddled with big debt might not make it at the end of the day."
Share