Telkom looks beyond basic telephony
A newly formed offshoot, Telkom Media, will offer seven locally produced channels of entertainment, education, movies, shopping, music and round-the-clock news.
Telkom still needs to refine its plans, so how much it will invest, how many customers it aims to win, and when the idea could turn into reality are among the unknowns.
CEO Papi Molotsane presumably hopes to emulate the success of Hong Kong’s largest telecoms operator PCCW and BT of the UK, both of which have revitalised their businesses with a new generation of services.
Judging by the way Molotsane was avidly watching presentations by BT and PCCW at Telkom’s annual technology talkshop in Stellenbosch this week, he yearns to follow their lead.
Gradual liberalisation of the telecoms industry and evolving technologies are undermining Telkom’s stronghold as new competitors enter the space. But the beauty of liberalisation is that Telkom can enter new fields itself, says Molotsane. “We can get into areas like broadcasting and content and it opens up opportunities with voice, video, mobility and data. We are looking at pay television to provide the market with entertaining, innovating cost-effective solutions.
“We’d provide the basic telecoms infrastructure and get partners to help us with local and global content.”
The move is not a complete change of focus, as Telkom sees pay television as complementary to its fixed-line services, and customers will pay for both on one bill. The number of fixed lines being installed could also increase from its moribund state once those cables can deliver television too.
“Fixed-line phone penetration is very low at just 10% of the population, so we could use this offering to increase telephone penetration,” Molotsane says.
Pay television has been available since 1986, yet the take-up is low. Telkom’s chief sales and marketing officer Wally Beelders says countless people who could afford it and are interested in it are not being served by the existing supplier, MultiChoice. Beelders says there is no lack of demand, and blames low take-up on MultiChoice weaknesses.
That is a position Telkom understands intimately, being another monopolistic player that has failed to meet demand for the right packages at the right price.
Telkom’s failure in the telecommunications sector may help it get the television side right.
At the telecoms conference this week, Molotsane was leaning forward in his seat as PCCW’s vice-president of business development, Lindsay Servian, enthused about the success of its Now Pay-TV offerings.
It launched a little more than two years ago and has 550000 customers out of 2,1-million households in Hong Kong. Its decade-old rival Hong Kong Cable has 600000 customers, so the entry of PCCW has almost doubled the market.
“Now TV has been fantastic for us,” Servian said. Its 125 channels are delivered over broadband telecoms cables and by satellite, just as Telkom plans to do. PCCW designed a low-cost set-top box to decode the signals.
About 70% of its customers have subscribed to its television service, doubling the crucial monthly average revenue per user. PCCW’s share of the telecoms market has risen and customer churn to other networks has halved, as people now have a compelling reason to stay loyal.
“We tried to imagine what people sitting in an armchair actually wanted,” said Servian. It designed a service that lets people subscribe to as few or as many channels as they wish.
Its first interactive offerings include live traffic updates for specific locations, gaming channels, and the ability to make donations to charity or buy cinema tickets via the television.
More money is trickling in as people subscribe to real-time stock quotes and as absolute addicts pay extra for a library of video-on-demand. The next step is to expand into food ordering and delivery, and a click-to-buy service for items such as holidays, where watching a video can clinch a sale.
PCCW is way ahead of Britain’s BT, although BT is far from standing still. “Survival isn’t mandatory, but BT sees the need to transform quickly to get into next generation network services,” said its director of operations Paul Excell.
“Traditional telecoms players must reinvent themselves completely to stay relevant.” To do that it is building a 21st century network for £10bn.
For the year to March 31, BT’s revenue of £19,5m was up 6% from the previous year. Tellingly, the revenue from its traditional businesses fell by 3%, while “new wave revenue” jumped 38% to contribute £6,2m, or a third of the total. That new-wave revenue includes broadband internet access and mobility.
BT will begin broadcasting television over its fixed line and wireless technologies later this year. Telkom may not be too far behind.
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