The number of Telkom digital subscriber line (DSL) subscribers has declined for the first time ever. Between 1 April 2016 and 30 September 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 30 March 2016. Fibre-to-business remains the unknown with the operator simply stating that it has “42 176 end points terminating”.

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 1 October 2015 and 30 September 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 30 March 2017, 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 30 September 2016, it lost nearly 20 000 DSL subscribers but added approximately half of that (about 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 4Mbit/s service) together and the lost revenue, annualised, of those nearly 20 000 subscribers totals R115m!

But fibre means higher average revenue per user as these services are more expensive than DSL. So, even at the entry level of R699/month (10Mbit/s, capped), annualised revenue for those 10 658 new fibre customers is somewhere around R90m. 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.