What DStv and Telkom have in common
MultiChoice and Telkom are both well-known companies in South Africa and have dominated the market in their respective arenas.
MultiChoice, through its DStv service, was the number one option when it came to entertainment. If you wanted movies, TV series, and sport, DStv was the place to go.
Telkom, with its massive national copper network, was the go-to provider for Internet connectivity. ADSL was the most popular way to connect to a high-speed line and get a big data cap.
Then the competition came, and it hit them hard.
Big growth of fibre
In 2000, Telkom’s fixed-line empire was at its peak – the company had 5.4 million fixed-line subscribers. This was up from 3.5 million in 1994.
Telkom then strengthened its fixed-line Internet offering with the launch of ADSL, and later higher-speed VDSL services that provided up to 40Mbps.
As subscriber numbers went up, so did Telkom’s landline rental fee. In 2002, the monthly fee was R62.72. This rose to R133.30 in 2010, and R189.00 in 2016. Today, the fee is R220.74 per month.
During this period, fixed-line subscriber numbers were slowly declining – dropping from 4.9 million in 2002 to 4.1 million in 2011.
This drop started accelerating in 2012, and picked up even more pace after 2014 – when Vumatel first started rolling out its fibre network.
Following the launch of Vumatel, multiple fibre providers also started offering services and Telkom’s landlines were left in the dust.
Landline numbers declined from just under 4 million in 2012 to 3.6 million in 2014. From 2014, they dropped to 2.6 million by 2018.
Despite faster, better fibre hitting the market and subscriber numbers dropping, Telkom continued to raise its landline prices.
Telkom has worked to offset the loss of landline revenue by launching Openserve and continuing to grow its own fibre network, while offering competitively-priced mobile data and fixed-LTE services.
Despite this, the company has retrenched thousands of employees in recent years – with voluntary separation packages offered to staff as recent as September 2018.
Here comes Netflix
MultiChoice faces similar challenges to Telkom, although they are arguably in a much stronger position than the telecoms operator.
MultiChoice’s flagship entertainment product – DStv Premium – has lost a large chunk of its subscriber base in recent years while continuing to increase the product’s price.
In 2000, DStv Premium’s monthly fee was at the R300 mark. This gradually increased each year until it went over R500 in 2011. The price continued to rise to R789 in 2017, and then R809 in 2018.
According to information from MultiChoice and Naspers’ annual results, DStv Premium subscriber numbers remained healthy from 2012 to 2015.
In 2015, there were 2.35 million DStv Premium subscribers, while in 2012 and 2013 Premium subscribers made up over 30% of the company’s subscriber mix.
Between March 2015 and March 2016, however, MultiChoice went from 2.35 million to 2.10 million Premium subscribers. This coincided with the launch of Netflix in South Africa in January 2016.
At a fraction of the price of a DStv Premium account, Internet-connected South Africans jumped at the chance to sign up for Netflix without having to use a VPN or proxy to access the previously US-only service.
Netflix provided a huge library of content, mainly TV series, and those who could live without DStv’s SuperSport saw no reason to stick around.
DStv Premium – both in terms of subscriber numbers and as a percentage of the subscriber mix – continued to drop after the launch of Netflix. As of March 2018, its DStv Premium subscriber base is at 1.92 million.
Fortunately for MultiChoice, its lower-end DStv satellite packages continue to grow, although these bring in lower revenues for the company.
MultiChoice and Naspers have taken steps to combat Netflix, and launched Showmax in August 2015 – before Netflix landed.
It has also launched DStv Now for watching DStv channels online, and recently established Connected Video, a company which will oversee over-the-top services for the MultiChoice group.
This has not been enough for the company to maintain its structure, however, and in September, MultiChoice stated it was creating a “leaner and more agile organisation”, which could result in job cuts.
For both Telkom and MultiChoice, a dominant market position is being challenged by new technology and services that are in high demand for consumers.
A DStv account and an ADSL connection are not as desirable as a Netflix account and uncapped fibre for many South Africans.
This is an opinion piece.
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