Telkom (South Africa)
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Telkom SA SOC Ltd. is a wireline and wireless telecommunications provider in South Africa, operating in more than 38 countries across the African continent. Telkom is a semi-privatised, 39% state-owned company.
|Public, State-owned corporation|
|Traded as||JSE: TKG|
|Founded||1991 - Johannesburg, Transvaal Province, South Africa|
|Headquarters||Centurion, Gauteng, South Africa|
|Sipho Maseko, Group CEO
Deon Fredericks, CFO
Dr Brian Armstrong, COO
Wireless and Wireline Broadband Services
2005: R43.1 billion ZAR ($6.9 billion USD)
Number of employees
|19 197 (2014) |
History of telecommunications in South AfricaEdit
The first use of telecommunication in the Republic of South Africa was a single line telegraph connecting Cape Town and Simonstown.[when?] After Bell Labs' development of the telephone, the first undersea links were introduced, first connecting Durban and Europe, and soon after, the rest of the world. The network continued to develop through internal financing in a heavily regulated market as international technology developed. At this point, telephone services were operated by the South African Post Office.
In the 1960s, South Africa was connected to 72 nations and total outgoing annual international calls numbered over 28,800.
In the 1990s, South Africa launched its mobile operations, underwritten by Telkom in partnership with Vodafone. This subsidiary grew to be Vodacom, which Telkom sold in late 2008 in preference for its own 3G network. Vodacom has a subscriber base of more than 45M, with an average revenue per user of more than R60 across both rural and urban subscribers. Vodacom, together with the other operators, have come under criticism in late 2009 by government and the public for high interconnect charges. This issue is currently being discussed by the Parliamentary Committee on Telecommunications.
In 2004, the Department of Communications redefined the Electronics Communications Act, which consolidated and redefined the landscape of telecommunications licensing in South Africa (both mobile and fixed). The Independent Communications Authority (ICASA) currently licenses more than 400 independent operators with the Electronic Communications Network License (with the ability to self-provision) as well as issuing Electronic Communications Service Licenses for service deployment over infrastructure in the retail domain.
Telkom is no longer the single operator in South Africa, and faces competition from the second Fixed Network Operator Licensee, Neotel, as well as the three mobile operators, Vodacom, MTN and Cell-C. However, it still receives criticisms (see later) from smaller operators and the Competition Commission for setting South African broadband pricing in its favour.
Telkom group structureEdit
Telkom SA is structured under Group CEO, Mr Sipho Maseko. The retail division, including Telkom Business, Telkom Mobile, Consumer Marketing, Cloud and IT Operations are run by Group Chief Operating Officer, Dr Brian Armstrong and its Wholesale and Networks division is under MD Alphonso Samuels.
Cybernest focuses on Telkom's newly deployed DCO infrastructure in Cape Town, Pretoria and Johannesburg, as well as services thereupon, including data hosting, LAN and application management and managing IT infrastructure for corporate and large business customers.
Telkom acquired Business Connexion in September 2015 for approximately ZAR 2.7 billion with the strategic intent of obtaining a significant presence in the Information Technology (IT) market in South Africa. This was the second attempt at the acquisition by Telkom and was subject to a number of prescribed conditions set out by the competition authorities i.e. one of which was to ensure minimal impact on staff retrenchments. The integration of the two (2) organisations enabled a new and compelling value proposition to be offered to private and public business customers in the domestic market.
Jeffrey Hedberg was appointed Acting Group Chief Executive Officer on 7 July 2010 following Reuben September's resignation. Jeffrey was the CEO of Cell C from 2006-2009. However, on 13 January 2011, TechCentral reported that Hedberg will quit Telkom by the end of March 2011, citing that he felt that he would not be given the mandate he needed to fix Telkom commercially and operationally.
The mandate to control Telkom's corporate (and business) strategy was managed by the South African Government - a Class-A shareholder in the privately listed Company. It is speculated that Government is intending Telkom "to play a more active role in the rest of Africa". Telkom's performance in Africa has been less than spectacular, reporting a significant goodwill impairment in 2010 of its Nigerian operations.
In 2013, Telkom was rocked by speculation of corruption in terms of poor procurement practice, nepotism and mismanagement and the uncertainty around fired COO, Motlasti Nzeku, whose future at the operator remained uncertain.
Telkom market position and ownershipEdit
Telkom was managed by US-based SBC Communications (now AT&T Inc.) from 1997 to 2004. SBC has since sold its interest in the company, after reducing operational expenditure (reducing staff resources, etc.) and increasing revenue by increased product prices, thereby increasing the share-price for greater ROI.
The company is currently the market leader in the broadband space, with more than 500,000 customers on 2-40 Mbit/s DSL; it dominates the managed services market and has more than 250 corporate customers on its order book. Telkom SA operates 4.5M fixed access lines, bases on its 2008 annual report.
The Eastern Africa Submarine Cable System (EASSy) is an initiative to connect countries of eastern Africa via a high bandwidth fibre optic cable system to the rest of the world. Seacom is a privately funded venture which built, owns, and operates a submarine fibre-optic cable connecting communication carriers in south and east Africa. SAT-3/WASC or South Atlantic 3/West Africa Submarine Cable is a submarine communications cable linking Portugal and Spain to South Africa, with connections to several West African countries along the route. It forms part of the SAT-3/WASC/SAFE cable system, where the SAFE cable links South Africa to Asia. The South Africa Far East cable is an optical fiber submarine communications cable linking Melkbosstrand, South Africa to Penang, Malaysia.
Products and servicesEdit
Telkom provides ADSL retail services via their ISP Telkom Internet to consumer and business customers, and through Telkom Wholesale to other licensed operators. Most ISPs in South Africa, such as Afrihost, utilise Telkom's copper infrastructure for resell ADSL services.
Telkom provides ADSL with POTS. According to Telkom's figures, 92% of exchanges have been upgraded to support ADSL. Telkom is currently the largest provider of fixed-line broadband in the country, with 412 190 subscribers according to the 2008 annual report.
Telkom ADSL is billed as an add-on service to a POTS voice line. A PPPoE account, which can be provided by most Internet Service Providers (ISPs), must be purchased separately to the ADSL connection for internet access. ISPs are divided into two categories, those who purchase IPConnect from Telkom and those who resell PPPoE accounts from IPConnect ISPs or Telkom themselves. IPConnect is a Telkom bit-stream access product allowing ISPs to route internet bandwidth from their ADSL subscribers over their own bandwidth.
Three connection rate ranges are offered (associated with different connection fees) which are "Fast" (1024/384 kbit/s), "Faster" (up to 2048/512 kbit/s), "Fastest" up to 10240/1002 kbit/s (ADSL2+)) of bandwidth for downstream/upstream respectively. The actual speed obtained can vary depending on line conditions.
Telkom have released a 10 Mbit ADSL 2+ service for a limited amount of "Fastest" users on 15 August 2010.
As of 24 August 2012, "Faster" (1024 kbit/s) users started reporting speed upgrades to 2 Mbit/s (2048 kbit/s) on their ADSL Lines.
As of 2 September 2012, Telkom have begun the process of trialing 40Mbit/s VDSL and FTTx.
From 18 October 2011, Telkom Internet launched business offerings, and has subsequently increased value with speed upgrades and improved prioritisation for business users, as well as converting products to include soft-capping (unlimited browsing).
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Telkom had 3G products supporting at least 7.2 Mbit/s HSDPA available since 2008. The coverage was initially limited to a small part of the country.
Telkom fully entered the South African Cellular market under the brand 8ta. The public launch of the network took place on 14 October 2010 and products have been available since 18 October 2010, supporting both GSM and 3G services. The 3G Network supports speeds up to 10 Mbit/s (HSPA)  while the GSM network is fully EDGE disable. Telkom will be roaming on the MTN network outside its coverage.
Telkom Group Limited has the following South African subsidiaries, Trudon (previously TDS Directory Operations) and Swiftnet, trading as FastNet.
Trudon is the largest directory publisher in South Africa providing white and yellow pages directory services and electronic white pages.
Swiftnet operates under the name FastNet . FastNet operates the company's Internet of Things portfolio, as well as offering point of sale and wireless connectivity solutions to financial, retail, agri business and property management sectors.
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Recent legislation passed by the South African government have lowered many restrictions on companies wishing to provide telecommunication access in the Republic. Competitors to the land-line monopoly have flourished, with special note given to providers of wireless broadband, who provide greater geographical penetration, by means of the technology used, than Telkom. Examples of these providers include Sentech, an extension of the state-owned South African Broadcasting Corporation, and WBS Co., a black owned enterprise. On 31 August 2006, Neotel (Second Network Operator) announced the launch of its services as the second national operator, initially offering wholesale international services, with plans to expand to business & residential customers within months. Neotel plans to initially use CDMA-2000 wireless technology for the last mile infrastructure due to the government and ICASA's (the regulator) inability and unwillingness to unbundle the local-loop, leading some to suggest that it's not much more than a cellular operator instead of the much needed competitor to Telkom.
The three mobile telephone networks in South Africa, listed in terms of numbers of subscribers, are Vodacom (currently 65% owned by the United Kingdom's Vodafone, but until November 2008 jointly with Telkom SA), MTN and Cell C. There are several service providers, such as Virgin Mobile and Nashua Mobile, which subscribers can use to access the networks. There are approximately six times as many cellphone subscribers than land line subscribers in South Africa (30 million versus 5 million), and since these networks route their calls over their own network, GSM providers have taken a large chunk of Telkom's business, one reason for this is that many see Telkom as being an inept corporation, only interested in making money, failing to consider the customer. This is a fine example of a monopoly that would, in true free market environments, soon fail.
Another promising technology is Voice over Internet Protocol (VoIP), which may decrease the number of calls made over the public switched telephone network (PSTN) in the near future. Telkom's international calling rates are already far undercut by VoIP providers.
Finally, although the Government is taking steps to liberalise the market, laws regarding telecommunications are still quite restrictive relative to the United States and other developed nations.
An example of restrictive legislation is the Draft Convergence Bill, which attempts to control the development of such commerce. Telkom is currently under much fire from the Independent Communications Authority of South Africa (ICASA), who accused it of excessive ADSL line charges.
Pan African operationsEdit
Telkom operates in 38 countries in Africa, from regional hubs in Nigeria and Kenya via an integrated service provider strategy . It is expanding its service portfolio across managed voice, managed data, IT services & applications, and diversifying into new revenue growth opportunities in adjacent markets.
Recent acquisitions of Kenyan ISP Africa Online, and Nigerian mobile operator Multi-Links gives Telkom strategic hubs to expand data and voice services into Africa. Africa Online (AFOL) is a Pan African Internet Service Provider operating in eight countries with the 9th country through a joint-venture with Verizon South Africa. Multi-Links is a private telecommunications operator (as of 2009 a wholly owned Telkom subsidiary) with a Unified Access License allowing fixed, mobile, data, long distance and international telecommunications services focused primarily on corporate clients in Nigeria.
Via Africa Online, Telkom intends leveraging its international capacity to deploy satellite based Internet access. Through Multi-Links, Telkom is introducing converged fixed and mobile services to the Nigerian market.
Telkom experiences a high volume of complaints on a daily basis (one of the highest in South Africa). Many customers in South Africa are dissatisfied with the level of service delivery. Many users indicate that if a new subscriber is looking for a service that they should turn to alternative sources as Telkom cannot deliver on their promises (like many other services in South Africa). FTTH is now available from several select service provides and will cut Telkom's last mile completely out of the connectivity loop.
Monopoly and state ownershipEdit
This section's factual accuracy may be compromised due to out-of-date information. (October 2012)
High cost of Internet access is a major point of consumer frustration in South Africa. Telkom's monopoly, backed by government investment, over fixed line provision and international access is often pointed out as the primary reason for the high costs of telecommunications. In light of the high cost of entry, many broadband users have settled for cellular alternatives instead. Telkom Mobile's current out-of-bundle data rate is R0.29 ($0.024) per MB.
The continuing monopoly of Telkom in South Africa's communications industry, and government's large stake in the company, have been perceived by the public, consumers, and the private sector[by whom?] as not being in the public's best interests. The South African telecommunications regulator ICASA is overburdened and restricted in its capabilities as handed down by the Department of Communications. Telkom has a monopoly of all international calls originating within South Africa excluding VoIP, and of traffic over the SAT3 cable that provides most of South Africa's international bandwidth. The indecision over the second network operator Neotel, to Telkom's advantage, is also not considered to be in the public interest.
Telkom has also attracted attention for improperly conducting itself in a contract dispute with Telcordia on account of non-delivery of an integrated FlowThru solution, resulting in a decision from the Supreme Court of Appeal against its favor in which the judge described Telkom's legal team as conducting "verbal manipulation".
On 19 January 2007, a full-page advertisement was taken out in The Mail and Guardian, a national South African newspaper. Money for the ad was donated by dissatisfied South African individuals and businesses. The page was used as a public outcry, detailing some of the things Telkom has done, in hopes of bringing more attention to the current situation in South Africa's telecoms industry. The effort was organised by the Telecoms Action Group, TAG.
Perhaps one of the biggest criticisms of Telkom was its introduction of a monthly traffic limit or "cap". According to Telkom, this was a measure instituted in order for the South African network not to become "congested" with an overflow of information. However, the general feeling in the South African ADSL community is that monthly traffic limits were strategically put in place by Telkom in order to obtain the maximum amount of money from ADSL users. This is mainly because Telkom offers extra bandwidth to users for a price. If the limit is exceeded during the course of the month, the ADSL connection is capped, denying international access to the web, while allowing access to local websites, until the end of the month. The user can purchase extra GBs after he/she is capped however. The typical monthly traffic limits can be used up in less than a day, even on low-speed lines.
Another major criticism of Telkom was its institution of port prioritization or "shaping". This also was a measure introduced by Telkom in order for networks throughout South Africa not to become congested with too much information. However, port prioritization was an idea conceived mainly to benefit businesses in which employees all shared the same internet connection. Employees who used "bandwidth hogging" applications such as peer-to-peer (P2P) applications and network-intense online games often slowed down the network dramatically, preventing users who wished to browse web pages or check their mail to do so in a short space of time. Port prioritization solves this problem as it prioritizes certain ports for certain applications. It works according to a protocol which includes all ports and applications generally used in conjunction with them. These ports are sorted into a list of sorts. At the top of the list appear web browsing and email. These ports and the applications which use them receive the most bandwidth from the network. At the very bottom of the list are peer to peer applications, online games and virtual private networking (VPN). These receive very little if not no bandwidth from the network. Being unable to establish international VPN connections on the standard package has a detrimental effect on international freelancers who must pay for the much more expensive 'unshaped' service. Although it is the ideal solution for large companies, there is no choice in the shaping matter. Personal connections to the internet also get shaped. This has caused an uproar in the South African P2P and online gaming community as one has to pay over exorbitant prices (roughly two times more) to get their connections "unshaped."
In June 2013, Telkom accepted a R200 million fine to settle complaints that it used its dominant market position to block competition from other network providers.
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