Johannesburg - Fixed-line operator Telkom expects next year's fixed-line revenue to be knocked by tariffs, the migration from low-speed internet service or dial-up to high-speed ADSL product and the introduction of cost-based interconnection rates, according to the group's 2007 annual report.
Telkom posted fixed-line revenue growth of 1.7 percent to R33.3 billion. The group's total revenue increased to R52 billion from R48 billion in the previous period.
Telkom did not explain by how much revenue will decrease, but in its 2006 annual report it said it expected revenue to fall by 9 percent because of Neotel's entry into the market.
Telkom has reduced its overall prices by 1.2 percent and has filed its cost accounting manual with the Independent Communications Authority of SA (Icasa).
Icasa will analyse the documents and if it finds that Telkom is charging high fees for services that cost it less to offer, it might impose an interconnection rate. At the moment, interconnection rates between Telkom and other service providers are on bilateral agreements.
Dobek Pater, a telecoms analyst at Africa Analysis, said the migration from dial-up to ADSL by subscribers might not have a negative impact on Telkom, unless customers joined other internet service providers or switched to voice over internet.
"If existing customers migrate to ADSL, then its added revenue for Telkom," he said.
Pater said competition pressure on voice services was unlikely to be felt next year, since Neotel was planning to roll out to the consumer and corporate market in the next few weeks and did not expect the take-up to be huge.
Telkom said it was urgently investigating opportunities with cellphone partners to extend its offerings beyond fixed-line and data services, and to look for new revenue growth.
This has raised speculations that it might sell its 50 percent stake in Vodacom, since the network operator has announced plans to spend R7 billion to build a fibreoptic cable, putting it in competition with Telkom.
In the meantime, Telkom will extend the services of its subsidiary Swiftnet to that of a fixed-line and cellphone service provider model, as well as target small and medium enterprises. Swiftnet provides wireless services to companies that offer vehicle tracking, credit card and point-of-sale verification systems.
Telkom's operating profit fell to R14.5 billion from R14.7 billion in the previous period.
The group said it had put aside $70 million (R487 million) as a contingent liability for its long-standing dispute with US software maker Telcordia.
The five-year dispute is heading for arbitration in September. Telkom did not explain how it arrived at the amount, although last year Telcordia said it was claiming R1 billion.
The dispute arose after Telkom claimed that Telcordia did not deliver a software application it had promised. Telkom cancelled the contract and incurred expenditure of R594 million.
In the 2005 and 2006, Telkom did not provide contingent liabilities for the Telcordia dispute as it did not "believe it had present obligations".