Signs of profound change at Telkom - TechCentral

Signs of profound change at Telkom

Duncan-McLeod-180-profileDon’t look now, but something profound is happening at Telkom. The new management team, led by group CEO Sipho Maseko and board chairman Jabu Mabuza, appears to be actively trying to change (well-founded) perceptions that the company is a litigious and rapacious monopolist.

There are signs that the company, whose past behaviour landed it in hot water with South Africa’s competition authorities, now wants to play much nicer with the industry of which it forms a significant part. If this isn’t just a public relations exercise — and I don’t think it is — this would represent a significant break from the past.

For years, people in the information and communications technology industry have joked that Telkom is a law firm masquerading as a telecommunications operator. It’s also often said that the annual budgets set aside for Telkom’s legal and regulatory affairs offices are greater than the entire budget set aside by national treasury for the Independent Communications Authority of South Africa (Icasa).

Whether that’s true or not, the operator’s regulatory division — as one wag put it to me this week — has for years been the tail that wagged the Telkom dog. Signs in recent months are that the dog is actively reasserting control over its rear appendage.

Evidence of this is growing by the week, with talk of the company making approaches to Icasa and the rest of the industry, especially smaller players, seeking more constructive engagement.

Industry has every right to be sceptical, of course. This is a company that for the past 15 years has abused its dominance, extracting monopoly rents for as long as it could. For years, it charged criminally high fees for access to national and international backhaul links, keeping bandwidth prices in South Africa far higher than they should have been, in the process undermining South Africa’s economic growth to benefit its own bottom line. In the access network — the “last mile” fixed-line network into homes and businesses — its prices are still far higher than in markets we should benchmark ourselves against. Not surprisingly, that’s one of the few areas where Telkom still enjoys a near monopoly.

Scepticism also wouldn’t be unfounded given that this is a company that in the past would almost always opt for legal action if it found a decision not to its liking. It tied up the Competition Commission in the high court and later the supreme court of appeal for years, questioning the commission’s jurisdiction. It went “forum shopping” between regulators, looking for whichever one it felt would give it a more sympathetic ear. And its menacing legal and regulatory attack dogs were always there, arguing that giving an inch of ground on anything at all would lead to a calamitous outcome.

But this month’s settlement agreement with the Competition Commission — and endorsed by Competition Tribunal — for anticompetitive abuses committed between 2005 and 2007 appears to represent a ground-breaking change in approach.

Last week, tribunal chairman Norman Manoim gushed about the settlement, describing it as the “most impressive consent agreement that I have seen in my years at the tribunal”. He said the agreement was “a credit to the new leadership at Telkom for creating an environment where such an agreement could be reached”.

Sipho Maseko

Sipho Maseko

Though crucial aspects of the consent agreement, including the degree of wholesale and retail price cuts Telkom has agreed to, are confidential — the commission argues this is necessary because this is competitor-sensitive information — the fact that Telkom has agreed to a range of measures designed to police its behaviour is significant. It’s agreed to “functional” (operational) separation of its wholesale and retail business operations — it’s not yet clear precisely how this will work — and to stringent regulatory oversight and audits. The Telkom of old would have sooner taken the competition authorities to the courts than have agreed to such sweeping oversight.

Of course, the change in approach makes absolute sense. Telkom was on a losing wicket behaving like an arrogant monopolist. The fact is, it’s lost its monopoly in all but the last mile. It needs to play nicer with the companies against which it committed anticompetitive abuses. Only by working with downstream players like Internet service providers can it hope to rescue its fixed-line business.

Management needs all the resources it can muster to turn the Telkom ship around. Maseko and his team must figure out how to arrest the decline in fixed lines, grow broadband and build a mobile business as a very late entrant in a mature market. Working with the industry and with its regulators to do that will achieve far more than fighting them every step of the way.

  • Duncan McLeod is editor of TechCentral. Engage with him on Twitter
  • This column was first published in the Sunday Times

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