Telkom says its mobile business has been boosted by the launch in July of its FreeMe bundles built around data (not voice minutes) which largely upended the market.
It achieved profitability in that unit for the first time in the six months to 30 September. Despite the early success, it shared a solitary data point related to FreeMe: it “sold approximately 170 000 FreeMe bundles” on prepaid during the six months.
Because the product suite was only launched in July, it means FreeMe had only (effectively) been available for two months in these financial results. That translates to a pretty decent run rate of over 80 000 bundles per month (with it only being available for the last week of July).
However, one needs to bear in mind that FreeMe is primarily designed as a post-paid product. Telkom hasn’t disclosed any numbers in this segment but did say it “performed even better than our initial expectations” and that “early indications show significant increase in gross connection monthly run rates and an uplift in Arpus in the two-month period”. (Arpu is average revenue per user.)
An analysis of published post-paid subscriber and Arpu data is revealing. Arpu is on the up after being stagnant since the middle of 2015. More importantly, subscriber growth has accelerated significantly in these six months, even with the higher (relative) base.
Between April and September, Telkom Mobile added over 30 000 new subscribers per month. This is roughly double the rate it had been growing that base between April 2015 and March 2016. Now, not all of these customers are “normal” cellphone contracts, as this figure includes enterprise clients as well subscribers who have signed up to the company’s popular “fixed” LTE data contracts.
There are a few other promising signs, such as the smartphone base on its mobile network growing by 44% to 1,6m over the past year. Also, over 70% of sales of those prepaid FreeMe bundles were from Telkom’s own channels (website, self-service, retail stores). This means it is (substantially) less reliant on third parties for distribution than the other mobile operators.
Telkom says that it will begin migrating post-paid mobile customers from its “legacy” plans to FreeMe this month. This obviously won’t have an impact on its subscriber numbers, but we should see the effect on Arpu in the months ahead.
It remains to be seen whether Telkom will disclose overall or post-paid FreeMe subscriber numbers in May when it reports its 2017 annual results. It is highly likely that it won’t, for competitive reasons.
Vodacom’s migration of its post-paid base onto integrated price plans (Smart/Red) remains an impressive feat. As at the end of March 2016, over 85% of contract customers were on integrated price plans. That would be a useful benchmark with which to compare Telkom’s efforts (even if Vodacom’s offerings are less competitive than Telkom’s).
And even if Telkom doesn’t provide a breakout in the results for the year to March 2017 (in other words, data points for the second half from October), if the elevated rate of subscriber growth continues (or even increases), it would point to FreeMe doing very well indeed.
If the rate of subscriber growth had remained relatively constant at about 20 000 per month for the first four months of this financial period (six months to end-September), which is entirely plausible, this would translate into 100 000 additions in August and September (50 000 per month). One could easily construct a case for the vast majority of these to have been on FreeMe. Play that forward into October and November, and if Telkom finishes this calendar year with anything close to 250 000 contract FreeMe customers (excluding those migrated from legacy plans), executives should be (deservedly) reaching for the champagne.
- Hilton Tarrant works for immedia. This column was originally published on Moneyweb and is used here with permission
