Gugu Lourie (Tech Financials)
Telkom and MTN South Africa have entered into a heads of agreement to extend their existing roaming agreement to include reciprocal roaming and outsourcing of the operation of Telkom’s radio access network)
Telkom and MTN South Africa have entered into a heads of agreement to extend their existing roaming agreement to include reciprocal roaming and outsourcing of the operation of Telkom’s radio access network.
“In keeping with our plans to de-risk our mobile business we have explored various options in recent months. I am pleased that we are at this stage of engagement with MTN. The conclusion of an agreement will allow us to expand our mobile coverage and to reduce our operating costs and capital expenditure significantly,” said Telkom CEO Sipho Maseko.
“We will be able to provide our customers with effective access to the latest state- of- the- art national voice, 2G, 3G and LTE networks without having to incur the significant capital expenditure ordinarily required to achieve such national coverage. Both Telkom and MTN will have access to increased voice and data capacity, improved voice quality, and faster data speed, at a lower cost than would have otherwise applied.”
Under the deal, MTN will, in terms of a managed network service arrangement, take over financial and operational responsibility for the roll-out and operation of Telkom’s radio access network (RAN) . Telkom and MTN will conclude reciprocal roaming agreements to enable their customers to roam on their networks.
RAN is the wireless component of its network through which consumers connect to the core network. Basically, it includes the sections of the network that connect end-user devices to wireless base station infrastructure.
The deal will enable MTN and Telkom customers to have full access to the capacity and coverage of both operators networks through the reciprocal roaming agreements entered into between them.
The operators will continue with the independent provision of distinct retail and / or wholesale mobile services, marketing under its separate brands, maintain their own distribution network, client service infrastructure and billing activities. The arrangements will optimise usage of the both companies respective RANs but leave all other areas unaffected and independent.
Telkom said the rationale for the transaction was that the telecoms industry, in both South Africa and globally, is facing an unprecedented shift from traditional voice towards data. In order to meet this demand, both MTN and Telkom have entered into the proposed deal.
“Telkom should be able to provide its customers with effective access to the latest state-of-the-art national voice, 2G, 3G and LTE networks without having to incur the significant capital expenditure needed to achieve such national coverage. Furthermore, the adjustable nature of the roaming fees will assist in moving Telkom’s operating cost base from being fixed to being more variable in nature,” said Telkom in a statement.
“As a result of the deal, the range of services available to customers will increase, the customer experience will be enhanced and significant scale efficiencies, beneficial to both operators and their customers, would be realised.”
“This is not a mobile virtual network operator (“MVNO”), Service Provider or Reseller relationship; it is a ground-breaking means to outsource the operation of our RAN for scale and efficiency, whilst retaining and enhancing our competitive differentiation and flexibility,” said Maseko.
“This agreement will allow us to increase competitiveness and improve our capabilities to compete at both wholesale and retail levels.”
The proposed transaction will allow Telkom to maintain a mobile offering that supports a converged product set in the consumer and enterprise segments. It is important to note that Telkom will continue to define and manage its own mobile products and services and market itself under the Telkom brand. The company’s channels and distribution network, client service infrastructure and billing channels will be unaffected by this agreement. Telkom will continue to run these services as it currently does.
The finalisation of the deal is subject to conclusion of various binding commercial agreements to give effect to the transaction, and various other approvals, including approvals by regulatory authorities.