South Africa to open phone market

Telkom profits have been boosted by its Vodacom mobile phone unit

South Africa will issue a second fixed-line phone licence as it opens up its market and ends the monopoly of domestic firm Telkom.

Telecoms regulator Icasa is set to grant the licence on Friday allowing a rival to challenge Telkom, Africa's biggest phone company.

Consumer groups have complained that call charges are too high, and the government wants to cut business costs.

The new licence was sold to a group including Indian industrial firm Tata.

Its other members include Transtel, the phone operations of South African state-owned utility Transnet.

Shrinking pot

Analysts have warned that the changes to the market will hit Telkom's profit growth.

However, the firm has been preparing for the change and earlier this month thanked a reduced wage bill and strong growth at mobile subsidiary Vodacom for a 50% rise in profits.

Mobile firm Vodacom is co-owned by the UK phone company Vodafone.

Demand for phone services, especially mobile, are increasing in South Africa as the country's economic growth helps boost consumer spending power.

Analysts said that ensuring businesses and industry can make cheap calls will be key in ensuring that economic expansion continues.