Fat bite, thin detail

There were no signs of the economic downturn on display when Telkom announced its new strategic agreement with American operator AT&T on Thursday this week.

Summer Place in Hyde Park, Johannesburg, was the setting for the signing of the memorandum of understanding between the two companies. But while the food and wine were plentiful, details were sparse. Besides the fact that both companies have agreed to explore ways to take converged voice, data and mobile services into sub-Saharan Africa, the two operators divulged little.

Fortune Magazine recently ranked AT&T as the top company in the telecommunications industry and its global presence will bring huge benefits to Telkom.

The IDC’s telecoms analyst, Richard Hurst, said it was difficult to speculate what form the relationship would take.

However, it appears to be a significant relationship for Telkom that could translate into healthy business in Africa, especially in the field of managed data networks. “I know Telkom is salivating at the thought of getting into Africa,” said Hurst.

Telkom’s expansion within Africa has been restricted by the Vodacom shareholders’ agreement, which was lifted after the sale of 15% of Telkom’s stake to Vodafone, the other 50% shareholder. The remaining 35% will be unbundled to Telkom shareholders and Vodacom is scheduled to be listed on the JSE in early May.

There is a historical link between Telkom and AT&T. SBC, now a part of AT&T, owned a 30% stake in Telkom through the Thintana Communications Consortium, which it sold for a huge profit after Telkom listed in 2003.

SBC is said to have played a major role in South Africa’s failure to develop a competitive telephone service. While Telkom was under SBC’s control it failed to meet its roll-out obligations.

In the terms of the memorandum the two companies will begin connecting the Telkom network to the AT&T global network and look at opportunities in the mobile, hosting, voice and virtual private network arenas.

“We now have an opportunity to partner one of the strongest and biggest brands in the world; a company that owns and operates a global network,” said Telkom chief executive Reuben September.

This is not only a feather in our cap, but an opportunity to bring the value from AT&T’s global network to sub-Saharan Africa — value that we will channel to our customers.

“The agreement will give impetus to Telkom’s determination to expand geographically and become a fully fledged pan-African operator.”

September said that Telkom’s recent acquisitions of Africa Online and MWeb Africa, giving it a presence in 35 African countries, were critical in convincing AT&T to select the South African concern as its sub-Saharan partner.

AT&T business solutions chief executive Ronald Spears described the agreement as “a milestone” for AT&T.

“This relationship did not just occur overnight; it has occurred over the last 10 to 12 months that we have been in discussions.”

Spears said that the increase in advanced telecommunications networking could be a great driver of economic development in the region.

He said an increasing percentage of AT&T’s global customers has significant interests in Africa and requires state-of-the-art telecommunications services on the continent.

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