Telkom financial results for the year ended 31 March 2019 revealed a massive decline in fixed broadband subscribers – down from 981,176 in March 2018 to 847,650 in March 2019.
This is by far the biggest fixed broadband decline Telkom has ever seen, and equates to losing over 21,000 subscribers each month.
This 13.6% decline in fixed broadband subscribers is mainly due to a rapid decline in ADSL subscribers, who left Telkom for fibre and fixed-LTE services.
While Telkom also offers fibre-to-the-home (FTTH) products, it was unable to migrate DSL subscribers to its own Openserve and Telkom ISP offering.
This is a result of a lack of coverage and reputation problems, with many Telkom customers vowing not to do business with the company again because of its poor customer support.
Telkom’s strange fibre-to-the-home decision
There is a very strong demand for fibre-to-the-home services in South Africa, and it is now the biggest fixed-line growth area in the country.
With existing telecoms infrastructure in most neighbourhoods, one would expect Telkom to aggressively roll out fibre to dominate the market.
Not so. In fact, Telkom decreased its capital expenditure on its fibre network from R2.112 billion in its 2017/2018 financial year to R1.216 billion in the 2018/2019 financial year.
Telkom seems happy to be a me-too player in the South African fibre-to-the-home market, opening the door for companies like Vumatel, Frogfoot, and Octotel to eat its lunch.
These independent fibre operators are seeing exceptional growth and are building networks worth billions.
Telkom happy with situation
Telkom said in its results document that its investment in FTTH was “rationalised as we focus on areas showing a propensity for higher connectivity rates”.
The company said its FTTH connectivity rate improved to 38.4% – the highest connectivity rate in the market.
“We are prudent in our homes passed by fibre strategy and focus on homes connected,” Telkom said.
This basically tells us that Telkom is spending less and less money on its FTTH network and is happy to sweat its current fixed line assets.
Telkom’s current fibre-to-the-home subscriber base of around 165,000 should therefore not be expected to rapidly grow and make up for its loss in DSL subscribers.
Telkom’s fixed line and fixed broadband decline
The graphs below illustrate Telkom’s challenge to hold on to fixed line and fixed broadband subscribers.