Critical Consumer
Pat Sidley
JUST when you thought it was safe to dump your increasingly expensive Telkom phone and service and invest in a cellular alternative, Telkom has opted for legal action to make it less tempting to get the “better connection”.
Court action — which was postponed this week, but will go ahead in the new year — is aimed partly at stopping the cellular phone companies from undercutting Telkom.
By all accounts, the rate adjustments Telkom announced this week are long overdue and very necessary — despite the instincts of this Critical Consumer to whack the increases. Telkom has R9-billion of bad debts on its books, and its debt is equal to one year’s total income.
The normally bitter pill has been sweetened in many ways by Telkom, which has tried to ensure that the cost of a very short local telephone call should not increase. Other aspects like rental, however, will be more expensive.
Telkom often does things in a somewhat cliched style, however. Announcing the tariff increases, top management found it necessary to refer to such notions as “empowerment”. At a press conference this week, managing director Danie du Toit joined the chairman of Telkom, Dikgang Moseneke, in deifying the money-making activity of Telkom by linking it to the reconstruction and development programme.
Unfortunately, they seemed to expect unquestioning genuflecting at the mention of the holy term. Du Toit and his colleagues, however, backtracked when asked if they expected consumers gratefully to shell out the extra 10 percent their telephones will cost them from January 1, because the money may land up in the RDP. (The company has some RDP obligations in addition to its normal activities.)
It was just as well Telkom distanced its own connection with the RDP, for otherwise the cellular telephone companies would be compelled to point out that their social responsibility obligations are far more onerous.
They are obliged to create R1-billion of business outside their main business, creating thousands of jobs, among other things. Additionally, they have to install tens of thousands of telephones in underdeveloped areas — or incur very heavy penalties. When the cellular telephone companies were granted their licences which stipulate these obligations, the RDP acronym had not yet been coined. But both Vodacom and MTN are legally obliged to contribute to the essence of reconstruction and development in meaningful ways.
Telkom’s new tariff structure will mean that using the telephone in the daytime on local calls (which means largely businesses) will cost more. Rentals will cost more and consumers who told Telkom their lines were for business use will now also have to pay more for what was called a “value- added service”. Pensioners will have to pay more too, but their increases are slightly smaller than the other rate hikes. The average increases overall will run around 10 percent, which Telkom says is less than it believes the inflation rate will be.
The pill has been sweetened on long distance calls and the connection fees between cellular and Telkom users. Telkom is having to meet its competition both locally (from cellulars) and internationally (from the call-back services) that have substantially eroded their profitability — and they now want the business back.
Before deciding on the increases, Telkom approached some consumer organisations to hear what they had to say about it. Unfortunately, it was the usual gang who pitched up to talk to the company — the Consumer Council, Consumer Union, Housewives’ League and the Consumer Council of the North- West. It’s a pity other organisations which would represent more consumers did not bother to pitch up, though some were asked to participate.
The newer tariffs announced by Telkom are based on the fact that 76 percent of calls made are local but represent only 25 percent of the income, while 24 percent of the calls are long distance and account for 75 percent of the income. The company wishes to get more revenue out of the areas where most calls are being made.
In fact, Telkom is interdicting the cellular phone companies and various others from cutting prices at the same time as it is shoring up its bottom line by charging more.
Telkom wanted journalists to note that its views had not been represented in the coverage of its intended court case thus far. However, attempts to get Telkom’s side of the story have resulted in that much-abused defence of the secretive: “The matter is sub judice.”
The court case concerns MTN’s offer of lower long-distance rates than Telkom’s. However, the case actually revolves around two crucial aspects — one from the consumer’s perspective, the other slightly more esoteric.
Before the cellular phone networks (Vodacom and MTN) set up business, they entered into a three-party agreement with Telkom that they would not undercut Telkom’s rates for the duration of the licence, which is about 15 years. However, the regulator of the industry, Ters Oosthuizen, who has to agree to all the tariffs set by the networks, gave effective permission for undercutting when he ratified MTN’s latest set of tariffs, which undercut Telkom on overseas calls.
The court case is likely to clear up the power of the regulator and whether or not he is entitled to regulate by superceding existing agreements. If the court next year allows the tariffs, consumers will benefit — despite Telkom’s somewhat quaint view of the market which says that anybody enjoying the fruit of such undercutting clearly hasn’t a clue about markets and business.
* It had been a source of fascination to this Critical Consumer, who sat through the videod press conference at Telkom in Randburg this week, to note that all the media liaison people, plus other higher-ups, use cellular telephones to communicate with the outside world. They are naturally all Vodacoms. (Telkom has a substantial stake in Vodacom.)
The mystery was cleared up when an inquiry put to the cellular phone industry disclosed that Telkom has probably made between R100-million and R200-million this financial year from its contracts between the two sets of services. It clearly benefits Telkom twice over to keep the cellular phone tariffs high. Telkom can charge us and them, and cream it with a little “added value”.