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Telkom’s DSL base in decline and the fibre race is on…

It simply cannot be ‘business as usual’ in the fixed-line market!

The number of Telkom DSL subscribers has declined for the first time ever. Between April 1 2016 and September 30 2016, the operator lost 19 714 DSL customers. This went largely unnoticed by the market as Telkom changed the way it reported fixed-line subscribers at the end of last year, shifting to “fixed broadband subscribers” from previously separate disclosure.

It also no longer specifically disclosed the number of fibre subscribers, instead highlighting the ‘headline’ fibre-to-the-home (FTTH) number of 144 512, with a “connectivity rate of 13%”. In other words, it has just shy of 19 000 active FTTH subscribers (18 787), more than double the number of customers connected via fibre as at March 30 2016. Fibre-to-business remains the unknown with the operator simply stating that it has “42 176 end points terminating”.

 

Mar-15

Sep-15

Mar-16

Sep-16

Fixed broadband

1005286

1015307

1027507

1018405

Core DSL*

996945

1006966

1011120

991405

Internal lines

8341

8341

8258

8213

Fibre

0

0

8129

18787

* Business, consumer, corporate, government, wholesale

Source: Author’s calculations based on Telkom disclosure

By its own disclosure, its total fixed broadband subscriber base (fibre, DSL and internal lines) grew by just 3 098 in the full year between October 1 2015 and September 30 2016. That’s 258 lines a month!

All of this growth has been in fibre. Of course, what we’re currently seeing is a seismic shift in the broader market from DSL to fibre. Telkom argued in November that customers were also moving from DSL to fixed-LTE, but this is not a comparable service, despite what it says. Telkom was late to the fibre game and it’s playing catch-up as quickly as it can.

The DSL market is now in structural decline. In May, when Telkom publishes full-year numbers to March 30, we’ll see whether that deterioration has accelerated (highly likely). Based on the operator’s disclosure to date, there are now fewer active DSL subscribers than there were at the start of 2015.

Telkom is in a race to shift as many of its DSL customers to its own fibre services as quickly as possible. And right now, it’s falling behind. In the six months to September 30 2016, it lost nearly 20 000 DSL subscribers but added approximately half of that (±10 600) in fibre.

For it to have a fixed line business at all in five years’ time, this ratio needs to be 1:1, and ideally the other way round! It ought to be creating demand for fibre from new customers.

The revenue impact of these abandoning DSL subscribers is significant. Remember, too, that every single one of these DSL customers has to have a fixed line and pay rental for that too, regardless of whether they need/want/use it. Add that (R189) and an average monthly DSL rental of R299 (for a 4Mbps service) together and the lost revenue, annualised, of those nearly 20 000 subscribers totals R115 million!

But, fibre means higher average revenue per user as these services are more expensive than DSL. So, even at the entry level of R699 per month (10Mbps, capped), annualised revenue for those 10 658 new fibre customers is somewhere around R90 million. So, while its going backwards, the revenue impact is not as severe as you’d think.

There are two (linked) problems, however. Unlike DSL, Telkom is not the only game in town with fibre. And that highly-competitive market where companies like Vumatel, Fibrehoods and Metrofibre are running rings around Telkom means real downward pressure on pricing.

What should be dawning on Telkom and its executives – if it hasn’t already – is that it simply cannot be ‘business as usual’ in the fixed-line market. Every single DSL customer anywhere near a fibre endpoint or cabinet needs to be converted to a fibre one at any cost! This is not something that a traditional TV marketing campaign is going to solve. This battle is being fought street by street, complex by complex, neighbourhood by neighbourhood. DSL upgrades to fibre should be free and Telkom should simply be shifting those DSL customers to fibre automatically, as it rolls out the service (far easier said than done, of course).

The entire future of Telkom as a fixed line operator is at stake. And while its fallen behind, at this point it can still catch-up. In 12 months’ time, if the current trends hold, I’m not so sure it will be able to….

* Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

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COMMENTS   7

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There is probably a fair chunk of lost revenue for Telkom from those users shifting to fibre from no longer using their fixed lines. If they had a fixed line telephone I think it would be fair to say they were likely to use it (it is after all still cheaper than your mobile charges.)
Similarly just because people are changing to fibre doesn’t necessarily mean they are dropping their fixed line telephones…

I beg to differ……using OTT VOIP services, like WhatsApp Call, people are dropping their fixed lines. In this way, the cost of FTTH compares favorably to ADSL

Telkom has one big advantage over the others, it knows exactly where the DSL lines are active and the speeds they run at.

There has been a DFA fibre cable 80m from my home for over 3 years. Not once has any provider contacted us about getting fibre’d up.

OpenServe (aka Telkom) just came and, without community requests or lists of interested households, wired up the whole of Fearie Glen and Garsfontein with fibre on the existing copper network poles and a bit of trenching.Over half of the fibre is now lit and can be signed up for.

agree, i think vuma is behind the curve. they have a limited rollout and are not as professional when installing their infrastructure

Why can’t fibre also provide landline and cable tv services? My brother in Hungary pays less than R300 for a 30Mbit line, phone and over 40 tv channels. My nephew pays twice that and gets a 100Mbit line, phone with unlimited local calls and nearly 100 tv channels. The company offers different packages, the lowest speed is 30Mbit the highest is 500. Other companies offer 1000Mbit lines, but to be honest I do not know who needs even a 100Mbit line. The monthly cap is 300GB but it is averaged over a 3 months period.

“There are two (linked) problems, however. Unlike DSL, Telkom is not the only game in town with fibre. And that highly-competitive market where companies like Vumatel, Fibrehoods and Metrofibre are running rings around Telkom means real downward pressure on pricing.”

THIS !! I’m hoping that not only does it bring down the PRICE but also up their(OpenServe) customer service !!! Telkom is known for their crappy-service !!!

PS.To see all fibre deals in your are go look on FibreTiger we list all the isps so you can compare.

Strangely enough I have just received an sms from Telkom stating that from a specific telephone number I will be contacted about fibre that is available in my area

End of comments.

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