MTN has become the first network operator to break the stranglehold Telkom has on last-mile connectivity and will roll out its own national fibre optic network.
In a R1,2-billion project, the organisation expects to self-provide at least 50% of capacity by the middle of 2009.
Until recently, network operators have been dependent on Telkom to provide the so-called last-mile fixed line services, but have been hampered by the time and cost associated with sourcing from the incumbent.
For example, MTN CEO Tim Lowry explains that MTN currently has about 2 000 E1 lines on back-order from Telkom.
"Back in 1994 we argued to be allowed to self-provide but weren't allowed to, resulting in a costly supplier," he says.
Two months ago, MTN began a pilot project to connect Sandton and Rosebank with a fibre optic network – a network that has gone live and is already connecting corporate customers.
Today, Lowry announced that MTN will invest about about R1,2-billion in a nationwide fibre optic network, which will substantially reduce the company's transmission costs.
"This is a big investment and it is primarily for our own use," says Lowry. "Currently, transmission costs are about 2% of our costs. If data grows at the rate we predict it will, this will grow to 7% of our costs.
"We are in a position where we have to do something about it. With this solution we will reduce transmission costs."
MTN is planning to roll out the 5 000km on its own, although it would be willing to talk to other operators about sharing infrastructure.
The company has put the proposed network out to tender and hopes to complete the tendering process by November this year, at which time it will offer more details on its plans.
"MTN has rolled out national fibre networks before, in Nigeria and Ghana," says Lowry.
The operator plans to install fibre networks in the metropolitan areas, then connect them with either fibre or radio links. By mid-2009, it expects to be self-providing about 50% of its required capacity, with the balance still provided by Telkom and Neotel.
"This is a new dawn for MTN and for South Africa," Lowry says.
He adds that the company has issued a cautionary announcement regarding the possible purchase of Telkom's fixed line assets, but while these talks are ongoing, MTN will continue with its own infrastructure plans.
"It's business as usual," he says. "We are not going into a deep freeze while discussions are going on.
"There are compelling business reasons to do this (build its own national fibre optic network) as it will allow us to keep control of our costs. It also gives customers greater flexibility and quality.
"From a business and customer point of view, it makes sense."
MTN Networks' Mike Brierley adds that there is likely to be an early turf war as different operators start laying fibre optic cable.
"In the early phases of these roll-outs, the people who get in first will have an advantage," he says. "But this won't last long as the opposition will soon arrive.
"Given time, there will be some nice competitive pressures on long-distance fibre, and then prices will fall.
"This is a scale business, and the more people you can get to use your fibre network, the more prices will come down."