Telkom attacked from all sides
Telkom released a set of worrying financial results on Monday 21 November, showing a decline in revenue and profit and a rise in operating expenses.
One of the biggest challenges for Telkom is holding onto subscribers. Over the last twelve months Telkom lost 161,000 fixed line subscribers, following similar decline the year before.
Over the last decade Telkom has lost well over 1 million fixed line subscribers, accounting for more than 20% of their total subscriber base.
Declining fixed line subscriber numbers contribute to the company’s declining voice revenue, but it is by no means the only reason why Telkom is losing voice revenue.
Telkom’s total fixed-line traffic (millions of minutes) declined by 6.9% over the last twelve months. There was a particularly large decline in local calls (down 19.2%) and outgoing international calls (down 25.1%).
Considering that there was ‘only’ a 3.8% decline in fixed line subscribers, it means that the voice minutes were potentially being cannibalized by companies offering alternative voice offerings like Neotel, Vodacom Business, ECN, Internet Solutions and Vox Telecom.
Many companies are offering voice-over-IP (VoIP) services using Telkom’s ADSL services at lower rates than Telkom’s traditional analogue voice offering (which comes bundled with any ADSL line).
This means that many of Telkom’s fixed line subscribers are using alternative telecoms providers for their voice needs, eating into Telkom’s main revenue stream.
According to one industry player the ‘alternative’ fixed line voice market is growing rapidly. “Excluding least cost routing (LCR) this is now a substantial number – probably in the region of 200 million minutes a month,” he said.
So while Telkom is working hard to hold on to their fixed line subscribers amidst increased competition from wireless and mobile providers and cable theft, they are by no means assured of voice revenue from their existing fixed line customers.
Telkom management facing challenges
Add the potential threats of local loop unbundling (LLU) and various legal challenges, and it is clear that Telkom CEO Pinky Moholi has inherited a company which will not be easy to turn around.
Moholi described the South African telecommunications market as one under intense pressure as growth in fixed and mobile voice revenues slows considerably.
The Telkom CEO promised to turn Telkom around with an effective execution of their strategy which includes growing and defending profitable revenues, delivering on mobile investment and transforming their network.
According to analyst Irnest Kaplan, he respects both Moholi and Telkom CFO Jacques Schindehutte, but warned that without the right people lower down to execute their strategy “it’s not going to be so easy to execute on all those things”.
Loading ...