Telkom under pressure in fixed broadband - TechCentral

Telkom under pressure in fixed broadband

Sipho Maseko

The number of fixed-line broadband subscribers on Telkom’s infrastructure has dipped back below a million, falling 1.9% year on year to end-September 2017, as competitive pressures in the fibre-to-the-home market intensify. However, its mobile business has continued to outperform.

Telkom had 999 000 fixed broadband subscribers at the end of September, down from just over a million a year ago, despite huge investments by wholesale arm Openserve to replace legacy copper DSL broadband infrastructure with high-speed fibre networks.

The number of fixed lines in service slumped by 8.1% to end-September, to 2.8m, from 3.1m previously. However, average revenue per user from fixed broadband rose by 7.6% to R346.30.

Telkom is facing a big challenge in the fixed-line broadband market, a segment in which it previously enjoyed a monopoly. Rivals such as Vumatel are racing to wire up the cities to alternative fibre infrastructure.

The mobile side of Telkom’s business continued to grow strongly, with the number of mobile broadband subscribers jumping by 25.2% year on year to 2.8m. Mobile service revenue rose 43.2% to R2.3bn.

Telkom has cut its interim dividend by 9.9% as weak economic conditions put pressure on the top line and on operating margins. Headline earnings per share declined by 7.4%, while cash at the end of the period was R1.4bn, down 24.6% from September 2016.

Group operating revenue was R20.1bn, down 0.6% from last year’s result. Earnings before interest, tax, depreciation and amortisation declined by 1.9% to R5.2bn, while capital expenditure rose 9.2% to almost R4bn.

Telkom said it has been “disciplined” in extracting returns from its capital investment. “Mobile and fibre remain key capex focus areas and we have witnessed strong returns in the form of service revenue growth of 43.2 percent in mobile and an active connectivity rate of 24.5% for fibre.”

‘Tough economic environment’

The group spent R1.2bn on its mobile network in the six-month period, an increase of 56.3% over last year. It grew its number of sites by 24.1%.

“The first half of the year was characterised by a tough economic environment and increased competition,” said CEO Sipho Maseko in a note to shareholders. “We saw corporate businesses defer their spend on ICT as a result of an uncertain political, economic and policy environment.”

Maseko said business confidence “remains very low, with a lack of appetite for investment by corporate businesses”.

“Lower spend from government placed a further damper on ICT spend in the public sector.”  — © 2017 NewsCentral Media

  • Joe Black

    Well I’m jumping ship to Telkom mobile soon. I was recently badly burned by WASPS (on the Vodacom network – where else…). Telkom has the best account level protection against WASPS.

    So it’s a simple decision for me.

  • Ofentse Letsholo

    Yeah as long as your coverage is good jump in and be on prepaid just so you can have your freedom. I am still waiting for 2014 tower I was promised, it’s sad on my side and roaming is as bad but Telkom is the future indeed.

  • Gezza

    Careful. The “Honeymoon phase” is a real thing with Telkom mobile (uncapped LTE). Our (And a lot of others i’ve heard from) speed was great at the beginning, 30mbps. 2 months later it started going down. Within a months time we got 10mbps (off peak) now after trying to get service from Telkom for a year (No jokes) we end up with 4mbps if we’re lucky. They’ll let me know this week apparently if I can get an antenna or not.

  • Joe Black

    Not worried about speed. This is for my phone. My main internet connection remains my landline. All I want is to be able to make phone calls and IM – Oh… And not get inundated with spam and WASPs.

  • Gezza

    Fair enough. Only other alternative for us is 1.5mbps ADSL :(. Kinda forced…