Telkom is rapidly losing ADSL and fixed-line subscribers across South Africa, despite its plan to be the premier fixed-broadband provider in the country.
Telkom currently has 2,267,000 fixed-line subscribers, which is the lowest this figure has been since the dawn of South Africa’s democracy.
An even bigger surprise is that Telkom’s ADSL, VDSL, and fibre subscribers declined from 981,176 to 847,650 over the past year.
This 13.6% decline in fixed-broadband subscribers comes at a time when there is a strong demand for fibre-to-the-home services in South Africa.
One of the main reasons behind this decline is independent fibre network operators (FNOs) which are rapidly rolling out fibre networks and are moving Telkom’s clients onto their networks.
Telkom leaves the door open
For decades Telkom was the only fixed-line provider in South Africa, and over this period the company built an extensive copper and fibre network across the country.
Telkom has conduits and copper lines in millions of homes, and many of these households subscribed to the company’s voice and Internet services.
With an established network, conduits in the ground, and the contact details of millions of households, it looked impossible to compete against Telkom.
Telkom, however, did not make the most of its advantage. Through inaction and ineptitude, Telkom made it possible for newcomers to beat it at its own game.
Vumatel changes the game
While a few fibre-to-the-home providers rolled out networks in estates and complexes before Vumatel entered the market, the latter was the true game-changer in South Africa.
In 2014, Vumatel rolled out a fibre network in Parkhurst, with access prices ranging from free for a 4Mbps line to R1,299 for a 1Gbps connection.
The Vumatel model – where a fibre network operator (FNO) partners with a neighbourhood, estate, or apartment block to roll out fibre – rapidly gained momentum in South Africa.
Many fibre network operators launched over the next few years, targeting areas which were not covered by fibre yet.
This led to a frantic land-grab, which was great news for consumers who had been waiting for fast and affordable fixed broadband services.
Telkom losing market share to smaller operators
Telkom was unable to respond to the rapid fibre network deployment across the country by the new crop of FNOs.
These new FNOs are hungry, lean, and efficient, and are rolling out fibre networks much faster and cheaper than Telkom.
While Telkom used to dominate the fixed-line broadband market in South Africa, it started to lose market share to the new FNOs.
Today Telkom’s fibre-to-the-home market share is below 40%, with Vumatel, Octotel, and other players eating into its subscriber base.
“We are killing Telkom” – FNOs
MyBroadband spoke to a few FNOs on the sidelines of the recent 2019 Fibre Conference, and most of them said it is becoming consistently easier to compete against Telkom in the fibre market.
One FNO CEO told MyBroadband that Telkom was unprepared for competition in the fibre-to-the-home market.
Another FNO executive told MyBroadband they are killing Telkom in many areas where they operate, especially in high-density apartment buildings and greenfield deployments.
Telkom has become so vulnerable that some FNOs have started to roll out fibre networks in areas where it already has fibre coverage.
They believe that Telkom’s inefficiency and poor support have created an opportunity to compete against them and migrate subscribers away from the company.
Telkom admitting defeat in many areas
While Telkom continues to invest in its fibre infrastructure, it has significantly cut its fibre-to-the-home investment over the last year.
Telkom decreased the capital expenditure in its fibre network from R2.112 billion in its 2017/2018 financial year, to R1.216 billion in its 2018/2019 financial year.
Telkom said in its annual results that its investment in FTTH was “rationalised as we focus on areas showing a propensity for higher connectivity rates”.
“We are prudent in our homes passed by fibre strategy and focus on homes connected,” Telkom said.
Telkom subscriber declines
The graphs below show Telkom’s fixed-line subscribers and fixed-broadband subscribers over the last 5 years.
This is an opinion piece.