{"id":522825,"date":"2024-01-25T15:17:38","date_gmt":"2024-01-25T13:17:38","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=522825"},"modified":"2024-01-25T15:36:03","modified_gmt":"2024-01-25T13:36:03","slug":"how-telkom-lost-its-mojo","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/telecoms\/522825-how-telkom-lost-its-mojo.html","title":{"rendered":"How Telkom lost its mojo"},"content":{"rendered":"

Telkom used to own telecommunications in South Africa \u2014 but completely squandered its advantage through a series of poor decisions and by disregarding its customers.<\/p>\n

With Vumatel overtaking Openserve as the biggest fibre-to-the-home provider in 2019 and Telkom playing third-fiddle to Vodacom and MTN, it can be easy to forget how utterly dominant it was until as recently as the 2010s.<\/p>\n

Saying that Telkom used to be in the pound seats does not do it justice.<\/p>\n

It owned the pound seats. And it could charge you just for the privilege of watching it sit in them.<\/p>\n

Officially, Telkom had a legally protected monopoly until 2002. However, the government continued to defend its fixed-line monopoly until 2008.<\/p>\n

Although the Mandela and Mbeki administrations had adopted a policy of \u201cmanaged liberalisation\u201d of the sector on paper, in practice, the ANC government fiercely defended Telkom\u2019s monopoly.<\/p>\n

The market only truly began opening up after the private sector took the government to court using its own Electronic Communications Act of 2005 and won.<\/p>\n

Known as the Altech Case<\/em>, the 2008 court win effectively allowed companies with existing network service licences to build their own physical network infrastructure.<\/p>\n

Although called the Altech Case, several other parties were involved, including the Internet Service Providers\u2019 Association of South Africa (ISPA).<\/p>\n

ISPA had also stood against Telkom\u2019s attempts to monopolise all Internet access in South Africa in 1997.<\/p>\n

Telkom tried to convince the former telecommunications sector regulator that its state-sanctioned monopoly over voice services should extend to the Internet<\/strong><\/a>.<\/p>\n

Former Telkom CEO Sipho Maseko said this monopoly mentality hurt Telkom<\/strong><\/a> when it finally came up against actual competition in the 2010s.<\/p>\n

\u201cWhen you are a monopoly you do not have to compete, and that is what we were for 100 years,\u201d Maseko told attendees of a 2020 Unleashing Leadership Potential event.<\/p>\n

\u201cWe did not have to sell stuff. We took orders. You called us for an order, and we fulfilled that order,\u201d Maseko added.<\/p>\n

\u201cWe probably slapped you around a little bit and still gave you the order.\u201d<\/p>\n

\"Telkom<\/a>

Sipho Maseko, former Telkom CEO<\/p><\/div>\n

This hubris was also evident in Telkom\u2019s approach to its ADSL broadband product, first trialled in August 2002.<\/p>\n

Rather than modernise and launch the best possible service to entrench its fixed-line monopoly in the face of competition the government promised was coming, Telkom launched an intentionally crippled product.<\/p>\n

In addition to being expensive, relatively slow, and nigh unusable during the day, Telkom also hard-capped the first ADSL accounts at 3GB per month.<\/p>\n

If you wanted more than that, you had to buy a whole new account with another 3GB data allocation. Whatever you didn\u2019t use, you lost.<\/p>\n

Telkom\u2019s response to criticism and questions about this was that 3GB was more than enough for most people and that those who wanted more were the exception.<\/p>\n

Left unspoken was that only deviant pirates who were likely spending their time on Napster, Kazaa, and BitTorrent wanted more than 3GB.<\/p>\n

In a competitive market, this kind of attitude no longer flies \u2014 which Telkom learned the hard way.<\/p>\n

\"\"<\/a>

Telkom payphones, made redundant by cellular networks. By VladanRadulovicjhb \/ Shutterstock<\/p><\/div>\n

Besides enjoying a protected monopoly on fixed-line telecommunications, Telkom owned 50% of Vodacom until 2008.<\/p>\n

In what is considered one of the worst business decisions<\/strong><\/a> in South African telecommunications history, it sold 15% of its stake to Vodafone for around R22.5 billion.<\/p>\n

Telkom distributed the remaining 35% to its shareholders through Vodacom\u2019s JSE listing on 18 May 2009.<\/p>\n

It then launched its own mobile operator called 8ta<\/strong><\/a> in October 2010.<\/p>\n

While 8ta (later rebranded Telkom Mobile) initially showed good subscriber and revenue growth, this has slowed in recent years.<\/p>\n

Launching 8ta split the company\u2019s focus and resources, with Telkom pumping over R25 billion into its cellular network in the past 13 years.<\/p>\n

Had it remained invested in Vodacom and doubled down on its fixed-line business, it would likely have dominated South Africa\u2019s fibre market.<\/p>\n

Even with 8ta in the equation, had Telkom focused on rolling out last-mile fibre, things might have been different today.<\/p>\n

\"\"<\/a>

Telkom D-Link VDSL fibre-ready router<\/p><\/div>\n

In 2011 and 2012, under former CEO Nombulelo \u201cPinky\u201d Moholi, Telkom seemed to be making all the right moves to secure its future.<\/p>\n

The company had embarked on a project<\/strong><\/a> to roll out street cabinets called multi-service access nodes, which allowed for DSL speeds up to 40Mbps and paved the way for future fibre-to-the-home (FTTH) deployments.<\/p>\n

However, Moholi quit Telkom<\/strong><\/a> in November 2012 following government interference at an AGM the month prior.<\/p>\n

The South African government effectively holds a majority stake in the company through a direct shareholding combined with the Public Investment Corporation.<\/p>\n

Then-minister Dina Pule used this majority to block several key resolutions at the Telkom AGM.<\/p>\n

After Moholi\u2019s departure, Telkom\u2019s ongoing investment in its fixed-line network fluctuated wildly<\/strong><\/a> as it switched between allocating more capital to its fibre or mobile networks.<\/p>\n

This left the door open for upstarts like Vumatel, and more established challengers like Metrofibre and Frogfoot, to eat its lunch.<\/p>\n

As things stand, Telkom now has a struggling third-place mobile network operator while trying to claw back its top fixed-line spot from Vumatel, with its net debt ballooning<\/strong><\/a> over 3,200% over the last decade.<\/p>\n

Despite operating what is probably the largest fibre network on the continent with over 170,000km of cable in the ground, Telkom\u2019s monopoly-fuelled complacency has allowed it to snatch defeat from the jaws of victory.<\/p>\n","protected":false},"excerpt":{"rendered":"

If you wanted a phone line or Internet connection, Telkom once used to be the only game in town \u2014 a seemingly unassailable state-sanctioned monopoly.<\/p>\n","protected":false},"author":15,"featured_media":472013,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[5,28470,3],"tags":[6002,35,85319,14711,33386,279,109],"class_list":["post-522825","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-adsl","category-fibre","category-telecoms","tag-dina-pule","tag-headline","tag-internet-service-providers-association-of-south-africa-ispa","tag-nombulelo-pinky-moholi","tag-openserve","tag-sipho-maseko","tag-telkom"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/522825"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=522825"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/522825\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/472013"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=522825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=522825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=522825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}