Telkom targets mobile market
Telkom recently announced their 6 month interim results for the year ended September 2009 with a significant hit to their operating profits. As part of Telkom’s renewed business strategy the company is planning to penetrate the mobile market.
“In fixed mobile, we anticipate our launch to be in 2010. This will happen when we achieve the necessary coverage and channel readiness, to approach the market with confidence,” said Telkom Group CEO Reuben September, speaking at their interim results presentation.
“Fixed to mobile subscriptions continue to erode our revenues. Due to this, Telkom’s mobile offering becomes an imperative. Boldness is required in this space. A timid approach to mobile will not achieve our objectives,” said September.
Planning to build on the current business strengths of Telkom, September said, “We don’t consider this a cold start. After thorough research, we have invested a capital expenditure of R6-billion. Our market case has indicated that we clearly need to include 2G GSM technologies as well.”
Current statistics put the mobile penetration rate in South Africa at around 104%. Discussing the opportunity for a fourth mobile operator, in what appears to be an already saturated market, Pinky Moholi, Managing Director of Telkom SA said that these figures account for all SIM cards, which gives a skewed picture of the actual mobile penetration.
Moholi explained that there are a number of individuals who own multiple SIM cards, and there are also a lot of SIMs currently activated on the network that are not being used at all. On top of this, many SIM cards are used in commercial data and tracking devices. “We believe there is an opportunity in mobile – the mobile penetration rate per person is not exhausted in South Africa. There is room in the market for a fourth mobile player,” said Moholi.
September added that the mobile data market was in an early growth stage, and that this would be a key area of opportunity for Telkom mobile services. The Telkom CEO further said that bundled fixed-mobile servicea will provide Telkom with a unique value proposition.
Moholi continued by saying that, “Our strengths are that we already have infrastructure, sales channels, distribution networks, and frequency allocation. Over and above this, [the mobile market] is an opportunity to resolve some of the challenges we have in the fixed line network.”
“Implementing a mobile model will help us to restructure the business. We’ve built the business case as a self standing business [therefore] all the beneficial synergies are a bonus to that plan,” said Moholi, referring to the benefits of shifting reliance on copper infrastructure over to a mobile network.
Although optimistic about their 2010 entrance into the mobile market, Telkom does not expect the business to be profitable for a number of years. Peter Nelson, Telkom CFO said, “You wouldn’t expect to be starting out in mobile and be profitable. Our business outlook is to be profitable within three years. This is a long term investment for the benefit of shareholders.”
Telkom Mobile – discussion
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