Telkom promises broadband

Speaking at the presentation of its interim results to September, Telkom said it wanted to convert up to a fifth of its lines to broadband connections in the next three years. This compares to international norms of between 20% and 25%, according to recently appointed CEO Papi Molotsane.

Keeping the base of lines steady at 4,7m lines, this would mean between 710 000 and nearly 950 000 broadband subscribers, from the 95 290 ADSL (asymmetrical digital subscriber line, or high speed broadband) subscribers at the end of September.

This would represent broadband penetration – excluding any of the other providers – of more than 2%, from the current 0,2%.

Telkom grew its fixed-line data revenues – which includes ADSL, managed data networks and leased line facilities – by 17,5% to R3,2bn in the six months, out of total revenue of R16,4bn from fixed line.

Molotsane said Telkom would place an increasing emphasis on ADSL and other broadband products. The group said this was part of its strategy to provide a full spectrum of information and communication technology solutions including voice, data, video and internet services.

Integral to its long-term success, said Telkom, was evolving to a next generation, IP network. It says it will adopt a “phased approach” in this regard, driven by the requirements of customers.

International voice operators in other markets have seen their revenues suffer in the face of VoIP, or the channeling of voice services over data networks at cheaper rates. Molotsane says VoIP tends to affect companies that rely only on the provision of voice services. “We don’t want to let them (disruptive technologies like VoIP) disrupt us, in fact we will embrace them.”

Telkom also said it had successfully tested new high-speed broadband technology WiMAX with Intel, which would complement the deployment of ADSL.

Molotsane said one challenge for increasing broadband penetration in South Africa was the local loop network is longer than the average in other countries, so Telkom has been forced to roll out fibre into homes and small businesses to shorten the loop.

Another challenge for wide scale broadband adoption is the low penetration of PCs in the country. Molotsane said Telkom had sold nearly 4300 PCs as part of its bundled offering since inception in August (measured to the end of October).

The group spent R1,8bn on fixed line capital expenditure; 56% on expanding, or revenue generating capex. This included the roll-out of ADSL, investing in new line growth, for example in gated communities, as well as data connectivity and business systems and putting in links for the mobile operators rolling out their high speed data networks, 3G.

Paris Mashile, the chairman of regulator Icasa who also attended the results presentation, suggested that perhaps Telkom’s 161% growth in ADSL services was linked to the fact that as a de facto monopoly operator, it virtually had a “captive audience”.

Molotsane conceded that Telkom was the incumbent operator, but said the market had seen a proliferation of new operators, particularly on the wireless broadband front, and the second network operator would also come to market soon.