Telkom conceals true pricing

By Paul Vecchiatto for Telkom
Johannesburg, 08 Mar 2007

Telkom's deliberate policy of bundling and discounting services means it is able to conceal its true pricing from potential competitors, says Wally Beelders, Telkom's outgoing chief sales and marketing officer.

Beelders, who yesterday announced he would be leaving Telkom at month-end after a 30-year career, says the telecommunications utility had come in for heavy criticism over its list pricing structure that made it look extremely expensive.

He says the bundling and discounting of services policy was deliberate to make the group better prepared to meet increased competition from home and abroad.

Beelders used the example of Telkom's "Closer" retail bundled service, whereby a consumer pays an initial R300 for 1 000 call minutes, irrespective of the destination.

"This equates to around 30c per minute for the call, which is a huge saving," he says.

According to Beelders, more than 220 000 consumers have signed up for the Closer package since it was introduced a year ago, representing about 12% of the consumer market.

"We have not been very successful in defending our pricing structure and a lot of criticism has come from people who have only examined our list prices and not really taken a close look at our bundled offering," he says.

Bandwidth explosion

Beelders, who joined Telkom in 1977 as a trainee technician, has worked in a number of the group's departments, including the wholesale division, and was heavily involved in the development of the interconnection regime. He assumed his current position in December 2005, following the controversial exit of his previous boss Nombulelo "Pinky" Moholi.

He says SA is on the verge of a bandwidth explosion as more and more demands are being placed on the infrastructure by organisations and consumers.

"We have seen a very aggressive rollout of ADSL services and we have laid more fibre optic cable in our access layer in 2006 than we laid out during the preceding five years," Beelders says.

He says that Telkom and the country are, however, well positioned to cope with this explosion of bandwidth demand as Telkom has doubled its SAT-3 [one of the undersea cables] capacity and that, on Friday [tomorrow], the maintenance and construction agreements for the East African Submarine Cable System (Eassy) are to be signed.

"I think [public enterprises minister] Alec Erwin is not off the mark about establishing Infraco, because we have a number of events on the horizon, such as the 2010 Soccer World Cup and the Square Kilometer Array," Beelders says.

But he warns that building a network is far easier than maintaining and managing it.

SAT-3 exclusivity

Exclusivity of the SAT-3 cable, of which Telkom owns 27%, is due to expire in November, meaning that customers could approach any of the consortium's members to obtain bandwidth.

"But that is not an issue. Telkom is ready for the competition and it is prepared to let it happen," Beelders says.

Beelders, who is 47, says he has not made a definite decision about his future yet, but he denies rumours that he will join Infraco. His vision for the ICT industry is that it is on the verge of consolidation.

"I believe there is an opportunity to lump a number of the smaller companies together," Beelders says.