Close to boiling point

ADSL South Africa (Broadband South Africa), 9 April 2007

It seems that pressure on Telkom for a telecoms reform is close to boiling point if recent developments are taken into account.
 
The fact that Telkom CEO Papi Molotsane has left Telkom last Thursday is one of the signs that pressure from Telkom investors and other parties are close to boiling point.
 
While it was also not the first time that President Thabo Mbeki protested Telkom’s stranglehold on the telecoms market, his frustration ‘…finally spilled over at the weekend during an interview with the Financial Times’ (The cost of Telkom, Business Day, 5 April 2007). He accused ‘…Telkom of profiteering due to the exorbitant rates it charges in some areas’ (The cost of Telkom, Business Day, 5 April 2007). He also made it clear that ‘…the government had been talking to Telkom about the situation’ (The cost of Telkom, Business Day, 5 April 2007).
 
Increased pressure from consumers is also reaching boiling point because of Telkom’s failure to properly adjust its broadband prices after generous price cuts by players such as MTN, Vodacom and others.
 
In other words, increasing pressure on Telkom to take positive action is getting to a level where Telkom can’t just ignore pleas for reform like in the past.
 
Sure, but I doubt if something positive will come from this. What’s different this time?
 
While we share your concerns, ADSL South Africa is confident that we’re going to see positive changes this time mainly because the Soccer World Cup of 2010 is almost on our doorstep… don’t underestimate Government’s desire to sell South Africa as ‘heaven on earth’ when thousands of spectators pitch up for this well advertised event.
 
In other words, Government might actually start to do what’s necessary to see the cost of telecoms coming down in South Africa.
 
It seems that Government talks with Telkom ‘…have had some sort of impact. This week, Telkom agreed to review its pricing structures to ensure that its rates became internationally competitive’ (The cost of Telkom, Business Day, 5 April 2007). While we mustn’t make the mistake to trust Telkom nor Government for that matter, it’s at least welcoming to hear that Telkom is making the right noises and not just snorting at pleas for reform like before.
 
In other words, something positive should come from all of this because this time there’s a Soccer World Cup coming our way.
 
We also believe Neotel’s entrance in the residential market later this year will help to push Telkom into the right direction, although this will not happen overnight.
 
You mean there’s going to be major price cuts coming from Telkom’s side?
 
No, but we believe there will be positive changes.
 
‘Without wishing to appear overly sceptical, the chances of any big price cuts remain remote in the absence of meaningful competition. There simply is no incentive for Telkom to cut prices, and as a listed entity, the telecoms group has an obligation to its shareholders to run its business in such a way that it makes as much profit as possible’ (The cost of Telkom, Business Day, 5 April 2007).
 
In other words, don’t expect fireworks.
 
ADSL South Africa (Broadband South Africa) welcomes all efforts to place increasing pressure on Telkom. One of these sunny days they will give in and come around.