{"id":8739,"date":"2012-04-01T23:58:03","date_gmt":"2012-04-01T21:58:03","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=8739"},"modified":"2012-04-02T11:18:28","modified_gmt":"2012-04-02T09:18:28","slug":"telkom-kt-corp-deal-bad-news-for-vodacom-and-mtn-analyst","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/telecommunications\/8739\/telkom-kt-corp-deal-bad-news-for-vodacom-and-mtn-analyst\/","title":{"rendered":"Telkom-KT Corp deal bad news for Vodacom and MTN: analyst"},"content":{"rendered":"

An analyst argues that a deal between Telkom<\/a> and KT Corporation (Korea Telecom)<\/a> may result in high-volume, low-margin broadband products in South Africa, putting pressure on the margins of other operators like Vodacom<\/a> and MTN<\/a>.<\/p>\n

KT Corp, South Korea\u2019s largest telecoms company, recently completed due diligence on Telkom, ahead of a planned stake purchase.<\/p>\n

In October KT Corp announced that it planned to acquire a 20% stake in Telkom in a deal worth R3.8 billion.<\/p>\n

Despite the potential KT Corp deal, Telkom shares plummeted in recent months – down from a 12-month high of R38.49 in May 2011, to a 12-month low of R24.00 on Friday 30 March 2012, at the close of business.<\/p>\n

\"Telkom<\/a>

Telkom share price over last 12 months<\/p><\/div>\n

This share price slump points to an investment community which has lost trust in Telkom, and Hlelo Giyose, chief investment officer at First Avenue Investment Management, explains that a deal with KT Corp is not necessarily good news for shareholders.<\/p>\n

Speaking in an interview on Summit TV, Giyose said that KT Corp is known for its low-cost broadband services in Korea.<\/p>\n

Giyose argued that KT Corp will import their low margin and low return model to South Africa, which is good news for consumers but bad news for shareholders.<\/p>\n

Giyose added that KT Corp\u2019s entrance into South Africa will be very disruptive in the local telecoms market, forcing Vodacom and MTN to relook their business models around data.<\/p>\n

Giyose is not the only person who warned that the current telecoms business model, which relies on high-margin voice revenue, will change.<\/p>\n

New Cell C<\/a> CEO, Alan Knott-Craig<\/a> said that the demand for data currently far-exceeds the supply. To fix this situation, higher broadband speeds and lower data prices are needed.<\/p>\n

These lower prices mean lower margins to mobile operators, but according to Knott-Craig, that is unavoidable.<\/p>\n

\u201cBecause this country started pretty late in building super-high capacity infrastructure, I guess the operators\u2026were pretty much used to the margins [on data] they enjoyed from voice,\u201d argued Knott-Craig.<\/p>\n

Lower data prices translate into lower margins to operators, and this in turn will require a rethink of current business models. The growing trend of carrying voice over data will put further pressure on operators to move to a low-margin, high-volume business model, Knott-Craig said.<\/p>\n

Related articles<\/strong><\/p>\n

Changing the rules: Alan Knott-Craig<\/strong><\/a><\/p>\n

Price is not a strategy: Alan Knott-Craig<\/strong><\/a><\/p>\n

I will change the rules: Alan Knott-Craig<\/strong><\/a><\/p>\n

Mobile voice disruption planned for SA market<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Analyst argues that a Telkom-KT Corp deal will be good news for consumers, but bad news for other telecoms players in South Africa<\/p>\n","protected":false},"author":2,"featured_media":4810,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[43,42,2160,26,2159,28,65,27],"class_list":["post-8739","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-telecommunications","tag-alan-knott-craig","tag-cell-c","tag-first-avenue-investment-management","tag-headline","tag-hlelo-giyose","tag-mtn","tag-telkom","tag-vodacom"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/8739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=8739"}],"version-history":[{"count":12,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/8739\/revisions"}],"predecessor-version":[{"id":8808,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/8739\/revisions\/8808"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/4810"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=8739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=8739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=8739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}