A crack at a new life for Telkom - TechCentral

A crack at a new life for Telkom

[By Duncan McLeod]

Telkom, SA’s incumbent fixed-line telecommunications operator, must face up to the fact that it has reached an inflection point. It ought to invest tens of billions of rand to take high-speed fibre-optics into millions of homes and businesses before someone else does.

Telkom’s fixed-line access network is dying. Its ageing copper network infrastructure is inadequate to deliver the next generation of broadband telecommunications services. Not only is its copper network being stolen faster than it can be replaced, but copper technology has, at best, another decade of useful life before it’s superseded by better systems.

After years of strategic and operational failures as a result of poor and unfocused leadership, it has reached a point where, if it doesn’t reinvent itself for a new era in telecoms, it’s headed for big trouble. Telkom’s new management team, led by CEO Nombulelo Moholi, has realised the gravity of the situation. In notes accompanying the company’s 2011 financial results, Moholi says Telkom doesn’t have the “ability to absorb competitive pressures ad infinitum”.

“Therefore,” she says, “a step change in the way we invest and operate this business is vital.” Moholi makes it clear that the company remains overstaffed, despite letting go of tens of thousands of workers in the past decade. This is a big problem, given government, which has job creation as a top priority, holds about 40% of its equity.

Perhaps, though, it’s time for a discussion about Telkom’s future and its role in the SA economy. It’s time for brave decisions, backed by political support, which will change the direction of the company for the better.

Investing tens of billions of rand replacing its decaying “local loop” of copper cables with high-speed fibre optics won’t sit well with its shareholders. But I’d argue it would set the company up to succeed in the longer term and help stop the loss of market share.

Telkom ought to consider a national project that will deliver the sort of broadband that will ensure the country’s economic growth — and create jobs, not only at Telkom but also in the broader economy. Rolling out fibre-optic infrastructure to millions of people would achieve that.

Research across the world has demonstrated again and again how improved access to broadband, especially high-capacity fixed-line broadband, has a direct correlation with economic growth and job creation. It is the reason Australia’s government is backing a multibillion-dollar national programme to get fibre to millions of homes in that country. I’m not suggesting Australia has the right model — its government is paying for most of the A$36bn network build, something SA’s cash-strapped administration can ill afford — but the investment will pay economic dividends down the line.

Telkom is ideally placed to lead a national fibre-to-the-home project. It has the workforce and skills to get the job done and it has the rights of way and infrastructure that would facilitate a project of this sort of scale.

Of course, the project would require government support. It would mean Telkom suspending dividend payments for several years — it’s a pity it has already passed on a big chunk of the billions of rand it raised from the sale of Vodacom — and raising capital in the markets with government guarantees that those loans will be repaid.

Imagine how a project of this magnitude could re-energise a moribund Telkom. It would give the company a renewed purpose, give it a foundation for the future and provide a platform for economic growth and development in SA.

Experts say fibre to the home in SA is inevitable. Other companies are already toying with the idea. Telkom has what it takes to lead the way. But will it?

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