ADSL growth slows

Telkom launched its first commercial ADSL service in August 2002 – a 512 Kbps service with a 3 GB monthly usage limit and unlimited local bandwidth after a user reaches their cap.  Despite a strong demand for broadband in South Africa, the high prices and poor service levels associated with the service at the time meant that the initial growth was slow.

In the first twelve months after launch, Telkom had only signed up 12,000 ADSL customers, and after two years this figure was sitting at 37,000.  Telkom however dropped the price of its existing services and launched more affordable ADSL packages in early 2005, something which stimulated the take-up of the technology.

After the price cuts in March the number of new monthly ADSL sign-ups doubled, and this growth continued until last year.  Unfortunately the growth is starting to plateau, possibly due to Telkom’s reluctance to reduce their ADSL prices which have remained unchanged since late 2007.

Increased competition in the local broadband market has resulted in lower pricing across the board, which means that Telkom’s ADSL tariffs have become ‘outdated’.  Vodacom, MTN, Neotel and iBurst are all competing for market share, and Telkom is steadily losing ground in the South African broadband market.

Cell C’s recent announcement that it will be joining the fray with a 21 Mbps HSPA offering in 2010 signals even more competition, something which may convince Telkom to cut its ADSL prices and up its speeds.  Telkom’s fixed line broadband service is one of its most valuable offerings in the retail market, and it has surprised many observers that the company appears to be content to relinquish market share to its wireless competitors.

The following table shows the relative half-yearly growth as well as the average number of monthly sign-ups in the past six months.

Telkom ADSL growth – discussion

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