The impact of the lockdown on South African ISPs explained

The prolonged COVID-19 lockdown in South Africa is crushing many businesses, but Internet service providers (ISPs) are one of the industries which are the least impacted.

A fast and stable Internet connection is crucial to support remote working, which forms part of the COVID-19 guidelines for many companies.

People also became more reliant on streaming services like Netflix and Showmax to stay entertained during the lockdown.

This resulted in strong demand for new or better Internet connections during the lockdown, which was good news for ISPs.

Cybersmart founder Laurie Fialkov told MyBroadband they have had an increase in new orders for their residential services.

Another area which is showing strong growth is cloud services, with more people looking to back up their work and assist with remote communication.

Fialkov said they have also seen a spike in their hosting business as many companies are looking to launch online stores.

Lockdown also hurting ISPs

While ISPs benefit from many aspects of the lockdown, they are also feeling the impact of the economic downturn.

Fialkov said for every new order, there is at least one of their existing customers who is struggling to pay because of financial problems.

He said they are trying to assist wherever possible through payment holidays, reduced payments, or converting customers to prepaid packages.

Fialkov said their strategy to assist customers has paid off as they have lost very few customers during the lockdown.

Cybersmart’s experience is not unique. Cipherwave MD Wayne D’sa said some of their customers informed them they are closing down as a resulting impact of the lockdown.

Many of Cipherwave’s customers have also asked for payment holidays and discounts. “Where we were able to assist, we have done so,” said D’sa.

He said Cipherwave had also engaged with its suppliers who have assisted them to some extent.

Laurie Fialkov
Cybersmart founder Laurie Fialkov

No salary cuts or retrenchments

The encouraging news is that Cybersmart and Cipherwave did not have to cut salaries or retrench staff.

Fialkov said their staff is their biggest asset and have shown exceptional dedication amidst the COVID-19 pandemic.

He said many staff members have to visit client premises to resolve problems or install new services, putting their lives at risk to ensure people have Internet access.

“At the very least we wanted to ensure that our staff members are financially secure and do not have to worry about salary cuts or retrenchments,” said Fialkov.

“We cannot predict the future, but for now our employees are not impacted by the lockdown.”

D’sa said Cipherwave they are monitoring the marketing conditions and customer sentiment closely, but salary cuts and retrenchments have not been necessary.

He added that they do not foresee any staff cuts in the short to medium term based on their current market analysis.

Wayne D'Sa
Cipherwave MD Wayne D’Sa

Preparing for a tough 18 months

Fialkov told MyBroadband they always hope for the best and plan for the worst. “In the worst case it will be 18 to 24 months before normal life will continue,” he said.

Cybersmart has some exposure to severely impacted sectors such as leisure, travel, and entertainment, but their worst-case modelling shows that they will be fine despite this exposure.

To prepare for a prolonged economic impact, Cybersmart is preserving cash by reducing non-essential procurements and reducing infrastructure builds that were speculative. New staff hires are also on hold.

Fialkov expects the economy to open up very quickly after many of the current restrictions are lifted, but in a very different for that existed prior to lockdown.

“We believe working from home will become the new norm. We also believe teleconferencing is here to stay and that online sales will show rapid growth,” he said.

He also predicts massive bandwidth requirements to and from the cloud and that streaming services will become the preferred entertainment service.

This is great news for ISPs, as long as the government does not “continue to shut down the economy to a point where it can’t recover”.

D’sa said they have a general concern around the business confidence in South Africa.

“As we are heading to level 3 of the lockdown where most businesses will be moving to re-open, we will only start to see the true impact of the lockdown in the coming months,” he said.

He thinks the overall growth in the ISP market is going to be flat as a result of trying to assist customers financially while maintaining overall cost inputs.

There are, however, some growth areas. “Our private cloud hosting product has seen good growth in March and April as customers moved their business applications into our datacentre and private cloud,” said D’sa.

He is also upbeat about Cipherwave’s prospects. “I’m comfortable that we are ideally placed to be able to assist our customers.”

Now read: Lockdown ISP speeds – The big winners and losers

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The impact of the lockdown on South African ISPs explained