Vodacom has the most extensive 3G network in South Africa, especially in rural areas.
Telkom, which is 40 percent owned by the state, said through the lease agreement it would use Vodacom towers, antennas and shelters to build out its own network. The deal also brings an end to the 2G and 3G roaming agreement that Telkom signed with MTN in 2010.
Telkom, which is valued at R28 billion, currently has a roaming agreement with MTN which will expire in June next year. It also said it would conduct a phased transition from the current roaming agreement, which was expected to be concluded by the end of the contract period.
Serame Taukobong, the Telkom consumer chief executive, said customers would benefit from the seamless handover in the roaming agreement since this it would eliminate dropped calls when customers move between the two networks.
“As we invest in network expansion, we had a look at, among other issues, the dropped calls which have a significant impact on customer experience,” he said. “This new partnership gives us an opportunity to reach more corners of South Africa and continue our mission to give more for less."
Cape Town-based portfolio manager Peter Takaendesa at Mergence said if it was implemented correctly, the deal was likely to benefit customers as they would now have access to a wider network.
“The benefit to consumer also comes as network providers share infrastructure, meaning there is no duplication of the network. This means they (Telkom and Vodacom) will also likely reduce prices, although this is not guaranteed,” he said.
In May, Telkom reported R41bn group revenue, saying it continued to invest in its network for future growth and had invested R7.9bn in capex, which was 19percent of revenue.
MTN and Vodacom are spending between R8bn and R11bn each on infrastructure including towers and radio equipment that transmit signals meanwhile, said Takaendesa.
Cell C in February said it would spend between R3bn to R3.5bn a year on capital expenditure over the next three years after it signed a new roaming deal with MTN in May to roam on its 3G and 4G networks. Cell C previously only roamed on Vodacom’s network.
Telkom’s largest rivals, Vodacom and MTN, have pumped billions in voice and data connectivity.
MTN and Vodacom cover over 80percent of the country’s population with 4G networks and over 90percent with their 3G networks.
Telkom share price increased marginally on the JSE yesterday by 0.07 percent to R56.11 and Vodacom closed 0.39percent lower at R132.23.