Telkom, MTN sign network deal

Telkom believes the transaction will help de-risk its loss-making mobile business.

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Just a day after cautioning shareholders that it was in talks with MTN South Africa, Telkom has signed a heads of agreement with the company in terms of which MTN will take over financial and operational responsibility for the roll-out and operation of its radio access network.

In addition, each company will be able to roam on the other’s network. Until now, the two had an agreement under which Telkom paid MTN to roam on the latter’s 2G and 3G voice and data networks.

The value of the deal has not been disclosed.

In a statement, Telkom CEO Sipho Maseko says the move is in keeping with the company’s plan to de-risk its loss-making mobile business. “The conclusion of an agreement will allow us to expand our mobile coverage and to reduce our operating costs and capital expenditure significantly,” he says.

“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,” he adds.

“Both Telkom and MTN will have access to increased voice and data capacity, improved voice quality, and faster data speeds, at a lower cost than would have otherwise applied.”

The statement says 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,” it says. “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.”

Maseko says the deal is not a mobile virtual network operator, service provider or reseller relationship, but rather a means to outsource the operation of Telkom’s radio access network for scale and efficiency while “retaining and enhancing our competitive differentiation and flexibility”.

“This agreement will allow us to increase competitiveness and improve our capabilities to compete at both wholesale and retail levels,” he says.

The deal is subject to the conclusion of various binding commercial agreements.  — (c) 2014 NewsCentral Media

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