Public Friend No.1

ADSL South Africa (Broadband South Africa), 3 June 2007

It seems that VoIP is going to be Public Friend No.1 if the full benefits of Voice over Internet Protocol (VoIP), including cost savings, kick in as more and more companies switch from traditional telephone systems to systems employing VoIP technology.
 
It is as clear as daylight that VoIP is going to have a major impact on the cost of telecommunications in South Africa. This is true especially when large corporate groups such as Mr Price is coming onboard…
 
‘Voice over Internet Protocol (VoIP) technology is being implemented to replace traditional telephone systems, at Mr Price, with millions of rands of costs' savings expected in the next five years’ (Telkom’s new enemy, Cameron, Moneyweb, June 2007).
 
In other words, Mr Price is kicking Telkom in the butt (and we’re sure many South Africans are LOVING IT).
 
Will savings be substantial?
 
Yes.
 
According to Steward Cohen, Joint Chairman of the Mr Price Group, they expect ‘…to save R20m to R50m a year by implementing VoIP technology’ (Telkom’s new enemy, Cameron, Moneyweb, June 2007).
 
In other words, one can expect Telkom’s revenue to take a R20m to R50m knock a year.
 
What about initial costs like extra hardware, et cetera?
 
Initial costs will increase costs in the first year.
 
According to Market Commentator Evan Walker of RMB Asset Management the ‘…move will increase costs in the first year, because there will be duplications in the system. After that, it is expected to cut costs to the extent that the move will add “a few cents to the company's earnings” (Telkom’s new enemy, Cameron, Moneyweb, June 2007).
 
In other words, it might come as a surprise to some but it’s not going to take years to recover the initial costs (mainly due to Telkom’s high prices).
 
Is this bad news for Telkom?
 
Yes, we believe it is although they will not admit it.
 
Mr Price has sent a clear message to other corporate groups that substantial cost savings is possible by switching to VoIP. While Mr Price’s move might not cripple the telecoms giant at this stage, Telkom will certainly start to feel the pain when more and more corporate groups follow Mr Price’s example.
 
We believe a big switch to VoIP will ultimately force Telkom to adjust their rates downwards to more acceptable levels or risk losing a substantial number of customers (and money in the process).
 
ADSL South Africa (Broadband South Africa) welcomes Mr Price’s move and hopes other corporate groups will follow suit. It can only give our economy a boost.