Telkom’s ambitious plan to fight back over broadband
It offers competitive prices and good broadband speeds, but Telkom’s road is still a long one
The sweeping changes to the price of broadband Internet offered by Telkom are overdue. The telecoms company has implemented drastic measures to trim its costs — largely at the cost of its inflated workforce — but has also dramatically reduced its wholesale and retail prices. For years, Telkom has lagged rivals who have been eating into its business as many fixed-line customers disconnect their home telephone lines and some office lines in favour of mobile phones.
In the past, Telkom has been accused of inflating prices and being anticompetitive. But its image as a company that has failed to transform with changes in the telecommunications world has slowly been changing.
Some of this change is out of necessity. Fixed-line voice usage revenue declined by 13,5% in the year to March. Leased line revenue declined 22%. But its overall subscriber base is gradually increasing. Telkom had over 1m broadband customers in March, which is up 8% compared with a year ago.
It has invested billions of rand in expanding and upgrading its fixed-line network, especially in fibre-to-the-home to offer superfast speeds to consumers to enable them to stream videos online.
Since April Telkom has announced a range of wholesale broadband services, retail voice and data price reductions for fixed-line and mobile packages. In April it announced price reductions of up to 63% across its product range of wholesale services, including wholesale fibre broadband access, and IP Connect. The fees of IP Connect — which is used by Internet service providers — are a big input cost for those providers.
Telkom Mobile customers will pay R99 for 1 GB of data, while some of its rivals, including mobile virtual network operators, charge R149 for the same bundle.
Telkom CE Sipho Maseko says lower prices have received a positive response from wholesale customers, which has helped stabilise falling revenue.
Gareth Mellon, ICT programme manager at Frost & Sullivan Africa, says one of the key trends occurring in the ICT sector is the belief that connectivity — by whatever means it is established — is effectively becoming a commodity.
This stems from the understanding that, once the initial capital investment is made, there are relatively low operating costs, and prices are expected to move downwards.
Most operators are thus shifting their focus to value-added services. This includes managed services, data usage, and content distribution. Telkom is no different in this respect, he says.
“The commoditisation of connectivity is a game-changer for the ICT industry and Telkom is fighting to retain its existing customer base so that it can look to grow its provision of valueadded services to them in the future,” he says.
But while Telkom continues to be highly competitive in pricing, World Wide Worx MD