While Telkom expects to lose 10% to 15% of fixed-line market share in the medium-term, the telecommunications incumbent says it is rallying a defence against competition from new entrants.
The fixed-line operator says it will increase capacity on its national core bandwidth by 1 000% and its metro layer core bandwidth by 1 600% in two years.
Earlier this week, MTN Network Solutions CEO Mike Brierley predicted Telkom would lose fixed-line market share in 2008 due to competition from MTN, Vodacom and Neotel. He also noted competition in metro fibre networks is strong.
Value-added network service providers, which will motivate to the Independent Communications Authority of SA next week to be allowed to roll-out national infrastructure, will add another layer to Telkom's competition in that arena.
MarketWorks business advisor Steve Edwards says: "I could give you practically any figure by way of prediction of Telkom's market haemorrhage over any particular period. But I think you can expect it to be large, given the company's own perception of threat, to the extent of trying to reinvent itself as an ICT company."
Telkom's interim financial statements for the six months ended 30 September outline its potential threats and its "defend and grow strategy".
It reveals that during that period, Telkom's national network increased by 167 nodes, with a bandwidth potential to increase by 17%. Moves were also under way to add more nodes and increase bandwidth potential by 47% for the next 12 months and 52 Metro Ethernet sites were rolled out in Western Cape and Gauteng to carry traffic, it says.
These activities were part of Telkom's move to build a next-generation network, the report says.
Own fault
However, Edwards blames Telkom for putting itself in a position where it could lose out to fixed-line challengers.
"Even if the cellular operators and their cohorts had stayed out of the fixed-line voice and data spaces, Telkom would continue to lose market share," he says.
"Thanks to Telkom's internal inefficiencies, coupled with their mandatory social service obligations, they are not as light on their feet as any of their competitors. Also, having set pricing so high in their halcyon days of total monopoly, they have enabled their competitors to make relatively easy money out of even new, expensive infrastructure - however much the competitors like to squeal about anticompetitive behaviour."
Telkom's "anticompetitive abuse" of its fixed-line infrastructure monopoly also set market expectations for data services as slow and expensive, he says. The result is that just about anything its competitors do looks like a service improvement or cost reduction and wins them credibility points, he adds.
"It's ironic, really, because Telkom's ADSL offering remains the most reliable, consistent and, effectively, the cheapest in that particular segment. That is, when you can find an exchange that can provide it, or a lackey that understands the importance of getting it installed really quickly," he says.
Winners and losers
While Vodacom Business will not make a significant impact in the first part of this year, there will be activity from the company in the latter part of 2008, says Brierley.
"Vodacom is a significant company with significant resources. We obviously can't ignore them. But we're certainly not going to lie down and play dead."
Edwards sees MTN winning Telkom's lost market share because it already holds significant market share, is aggressive enough, and has better service delivery and operational performance when compared to Vodacom.
"If they can just work some pricing magic, the day will be theirs. Neotel is too sleepy to make much of the opportunity in the short-term, though they and Vodacom will add to Telkom's misery once MTN has cleaned up," says Edwards.
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