World Report

State owned Telkom faces the prospect of competition as new moves are made to modernise the ICT industry

Sizwe Nxasana
CEO of Telkom

“We have been actively looking at synergies between the businesses”

Radhakrishna Roy Padayachie
Deputy Minister of Communications

“We want to keep up to speed with the development of new technologies”

hile it boasts Africa’s largest and most advanced telecommunications network, South Africa also has among the highest telephone charges in the world. This is set to change, however, with the appearance of a second national operator, which will be in direct competition with state-owned Telkom, hitherto the country’s sole fixed-line operator.

Eagerly awaited by business and consumers, the further liberalisation of the market will mean cheaper calls, greater choice and new opportunities in the ICT sector. Lower prices can be expected to stimulate consumer demand, particularly the uptake of broadband internet access services.

President Mbeki emphasised the importance of reducing business costs in his state of the nation speech earlier this year. Cutting the costs of telecommunications, which are currently about 10 times higher than those in developed countries, is seen as critical to increasing the competitiveness of the economy.

A particularly important change is that value-added network service providers will be permitted to carry Voice Over Internet Protocol (VoIP), providing a significantly less expensive means of making international calls.

Telkom SA, South Africa’s second largest listed public company, has welcomed the granting of a public switched telecommunications services licence to a second national operator. The company says it looks forward to robust competition in the sector.

Valued at more than R80 billion (£6.4 million), the telecommunications industry contributes approximately 4.5 percent to South Africa’s GDP. The country’s highly developed network includes the latest in wireless, satellite and cellular technology.

The cellular market has boomed over the past decade and now has more than 14 million mobile phone subscribers. Cellular services are currently provided by three licensed operators: Vodacom, MTN (Mobile Telephone Network) and Cell C.

Telkom SA owns 50 percent of market leader Vodacom. “We have been actively looking at synergies between the businesses and have already started benefiting from those synergies,” says Chief Executive Officer Sizwe Nxasana.
Currently under discussion is a Convergence Bill to provide a licensing and regulatory framework for the telecommunications, broadcasting and information technology industry. The bill defines new categories of licences and lays out rules and guidelines for licence applications and the construction of communications networks. It also provides for interconnection between licensees and a numbering plan to enable number portability.

Mandla Langa, Chairperson of the Independent Communications Authority of South Africa (ICSA) says the new Convergence Bill is aimed at removing technological distinctions and introducing a horizontally-based, technology neutral licensing system. “It may make the system more investor friendly,” he says.

Deputy Minister of Communications Roy Padayachie says South Africa expects to have a world-class ICT sector within the next decade. He describes the industry as “an important enabler” for accelerating economic growth and closing the gap between South Africa’s first and second economies.

“We are attempting a balanced programme,” says Mr Padayachie. “On the one hand, we want to keep the first economy up to pace with the development of new technologies. At the same time we are concerned that we don’t marginalise vast sections of our people into a greater trap of poverty.”

Recently completed was the final draft of a black economic empowerment charter setting down codes of good practice for the industry. The charter, which sets a target of 30 percent black ownership by 2014, is expected to be implemented later this year.