File picture: Siphiwe Sibeko

Johannesburg - An agreement between Telkom and MTN that could see the two operators sharing infrastructure in a joint venture would bear short-term benefit and long-term strategic weakness if Telkom was no longer active in providing cellular telephony, according to industry sentiment.

Telkom, the continent’s largest fixed-line services provider, is close to concluding a network-sharing agreement with MTN, according to people familiar with the discussions.

Arthur Goldstuck, the managing director of World Wide Worx, a Johannesburg technology consultancy, said yesterday that Telkom Mobile’s 8ta brand, which had yet to turn a profit since it was launched in 2010, could become a paying user on MTN’s network and pay a preferential wholesale rate for the use of the network as one of the options.

It was a short-term benefit that held long-term strategy weakness, Goldstuck said. “Telkom has to be in mobile,” he added.

The deal would give Telkom the same reach as MTN but ultimately Telkom should build its own cellular telephony network, Goldstuck said.

Telkom, which has had five leaders since 2007, is struggling to revive revenue from its consumer fixed-line business as customers have migrated to cellphones over the years and others have leap-frogged personal computers to smartphones, which are driving data consumption on the continent.

Recently Sipho Maseko, Telkom’s chief executive, said he wanted to at least halve the costs in Telkom Mobile.

During the six months to September last year Telkom reported a loss of R773 million in earnings before interest, tax, depreciation and amortisation (Ebitda) compared with an Ebitda loss of R716m a year ago.

Active subscribers rose 6.9 percent to 1 598 173 with a combined average revenue per user of R58.81 by September.

A sale of Telkom Mobile, which is the fourth operator, could trigger red tape and competition regulatory challenges, Goldstuck said.

Spiwe Chireka, a programme manager for telecoms in Africa at the International Data Corporation, said Telkom and MTN were likely to spin off a separate structure that could exclude collaboration on services and the sharing of customers. The move would save Telkom from incurring further impairments to its cellular business.

MTN would gain access to Telkom’s radio frequency spectrum to boost its high speed long-term evolution network roll-out across the country.

“About two years ago [Telkom] said they needed something like R6 billion to roll out their own network. Part of that was hinging on the KT [Corporation] deal which didn’t go through,” Chireka said.

Sifiso Dabengwa, the group chief executive of MTN, would not be drawn to comment, saying the company held talks with several parties. Telkom said yesterday it remained in discussions with “various parties regarding Telkom Mobile”.

Discussions between the two operators have been made more complex by a national plan to lower the cost of terminating calls on other networks.

MTN and Vodacom filed papers for an interdict against the Independent Communications Authority of SA (Icasa), in the South Gauteng High Court last month.

Telkom Mobile and Cell C, the smallest players, stand to benefit from Icasa’s ruling.

Maseko criticised MTN and Vodacom for the court case earlier this week.

Dabengwa said the criticism was a hindrance to discussions between Telkom and MTN.

“It doesn’t help. If you are trying to get to some agreement on one issue and you’re having a major difference that gets played in the way it’s been played out, it just doesn’t help.” Dabengwa added.