[By Duncan McLeod]
With more than half a dozen SA operators rolling out their own national networks, consolidation in SA’s telecommunications industry looks inevitable. There’s a chance Cell C and Dimension Data could be the ones to kick it off.
Didata division Internet Solutions looks a bit like the odd man out these days. The converged service provider, which remains a powerful force in the corporate market, is the only big player in its space that doesn’t have its own significant investment in telecoms infrastructure. Instead, it has to lease capacity on others’ networks.
Its rivals — Vodacom Business, MTN Business and Telkom Business — are all part of bigger telecoms providers, all of which are betting their futures on extending their nationwide and regional fibre infrastructure.
A race is already under way between MTN, Vodacom and Telkom — and, to a lesser extent, Neotel and Cell C — to determine which will be SA’s leading providers of services such as cloud computing and broadband.
MTN and Vodacom, with Neotel, are sharing the costs of building a national fibre system linking big towns and cities. And Telkom, which already has the most fibre infrastructure in the ground by far, is continuing to expand its network every year.
Internet Solutions, which doesn’t even have access to scarce radio frequency spectrum (not yet, anyway), may find itself outmuscled by bigger players that have their own extensive fibre and wireless infrastructure.
So, the news, which we broke on TechCentral, that Andile Ngcaba’s investment vehicle, Convergence Partners, has held preliminary discussions with a range of companies about building a national fibre-optic telecoms network is an intriguing development. Convergence Partners, you’ll remember, held Ngcaba’s stake in the controversial and politically connected Elephant Consortium, which acquired a stake in Telkom.
Convergence Partners is presumably (though not necessarily) flush with cash from the sale of its stake in Telkom and the generous dividends the fixed-line operator has paid out over the years. Though Convergence Partners is unrelated to Didata, it’s worth noting that Ngcaba is also chairman of the JSE-listed IT group’s SA business. And Didata is being bought by Japan’s NTT Corp, one of the world’s largest telecoms operators.
Didata says it’s too early to know whether NTT will pump money into Internet Solutions, allowing it to build infrastructure to take on the big operators.
That on its own probably doesn’t make sense. However, a tie-up between some of the smaller industry players, in which they share infrastructure to create economies of scale, could justify such a step.
Consider that Cell C needs to build a fibre-optic network to connect the new, high-capacity base stations it’s building as part of plans to reinvent itself as a mobile broadband player. Then consider that it would make sense for Internet Solutions to work with an operator that could bring the economies needed to invest in infrastructure.
Suddenly, a partnership could make sense, perhaps one brokered by a cash-flush Convergence Partners and involving the myriad other, smaller service providers.
Take it to its logical conclusion and perhaps it could even make sense for Didata, with NTT’s financial backing, to buy Cell C. After all, NTT owns Japan’s Docomo, one of the world’s smartest operators. Docomo would give Cell C the muscle to take on two powerful incumbents in MTN and Vodacom.
And a combined Cell C and Internet Solutions — perhaps ultimately in partnership with Neotel — could form a powerful force, able to take on the industry’s big players with a full set of consumer, corporate and wholesale products and services.
- Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
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