Waking the slumbering giant

Telkom is facing many challenges, including a failed international acquisition (Multi-Links), declining fixed line numbers, losing (selling off) its cash cow Vodacom, and losing market share in the South African broadband market.

A strategy Telkom often used to compensate for lower fixed line numbers was to simply increase line rental prices and keep broadband prices the same (instead of lowering prices to remain competitive).

This strategy worked well in a monopolistic environment, but with growing competition and Local Loop Unbundling (LLU) looming, the time for action has come – and this is what we are starting to see from Telkom.

Armed with a new chairman (Lazarus Zim) and new CEO (Pinky Moholi), Telkom has over the past few months shown more initiative in the broadband market than during the full reign of former CEO Reuben September.

Telkom remains unrivalled in South Africa when it comes to fibre infrastructure, and coupled with its extensive last mile copper infrastructure, the company is in a great position to dominate broadband in South Africa.

However, the mobile operators have  overtaken Telkom in broadband subscriber numbers, partly because of Telkom’s uncompetitive pricing. This situation may be changing.

Pinky Moholi
Pinky Moholi - Telkom CEO

Telkom aggressively promoting broadband

Telkom subsidiary, cellular operator 8ta, recently unveiled their 10GB data bundles priced at R199 per month, well below the cost of any competing offering in the market.

Only a few days later Telkom announced that their 1GB, 5GB and 9GB TelkomInternet subscribers will enjoy a total of 5GB, 10GB and 20GB respectively in July and August 2011.

Telkom also looks set launch an aggressive broadband promotion offering new subscribers free fixed line and ADSL installations, and three months of free 1Mbps/5GB Do Broadband services.

Such a promotion will go a long way toward growing Telkom’s ADSL subscriber base, and introduce new subscribers to the benefits of ADSL and broadband.

New, more aggressive broadband strategy?

Instead of blowing billions of Rands in Nigeria in its failed Multi-Links acquisition, it would have been far more constructive for Telkom to use that money to boost their existing fixed line broadband network and even invest in a fibre-to-the-home access network.

Telkom is now ridding itself of the money-guzzling Multi-Links business, and seems to be focusing its energy in areas where it is certain of success, such as fixed line broadband in South Africa.

Many industry players have predicted that Telkom will be untouchable in the local broadband market if they ‘wake up’ and make the most of their assets, and this seems to be happening now.

Higher ADSL penetration rates will not only boost revenues, but also help with Access Line Deficit (ALD) problems and even minimize the impact of LLU when it arrives.

It is no secret that Telkom is losing money on voice-only fixed lines, and one of the best ways to make up for the ALD is to bundle with the lines other profit generating value-add services such as ADSL.

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Waking the slumbering giant