Telkom is finally moving into the digital age in a bid to create digital homes and businesses off the back of an all IP-based network that runs on fibre, and high-speed mobile broadband.
While the company's transparency around its future vision - presented to investors yesterday - are to be applauded, it needs to move with haste to avoid missing out, says World Wide Worx MD Arthur Goldstuck. He notes Telkom has a legacy of piloting services endlessly, instead of rolling them out quickly, and it loses out as a result.
The telco is in the midst of a retrenchment process that will see more than 300 managers axed. It aims to transform fixed-line telephony into converged personal communication; turn broadband into digital homes and lifestyles; convert data connectivity into unbounded connected systems; as well as transform hosting into computing and software-as-a-service, COO Brian Armstrong told investors.
However, "owning" the digital home will require key services being added to the mix, including digital content, better connectivity, and e-learning, notes Armstrong. He says Telkom has four options for its future, which range from offering just connectivity to owning content, which it sees as the most risky plan.
Tough times
CEO Sipho Maseko told the investment community Telkom is facing four challenges: a decline in the fixed market, increased operating expenses, threats to its core fixed-line business, and a performance that is lower than its peers.
CTO Alphonzo Samuels says Telkom's transformation strategy is to move off voice - where revenue is declining - onto data services. It also aims to build "future-proof" capabilities based on fibre to overcome the challenge of limited broadband capabilities on the back of legacy, copper-based technology. It also wants economies of scale to be able to deliver high-speed, data-intensive services at affordable prices, as well as automated processes.
Samuels adds Telkom will focus on economically viable areas. The group is currently revamping its access network through the multi-service access node solution, which enables a "future-proof access network" that can be scaled and upgraded to deliver fibre solutions.
Telkom also aims to move into adjacent IT services, which it plans to do through its R2.67 billion offer for JSE-listed Business Connexion, as it seeks to compete in the converged space, as well as through partnerships and organic growth, adds Armstrong. Shareholders are expected to vote on the deal on Monday.
Armstrong notes the fixed market - estimated to be worth R48 billion by 2019 - is growing at a compound annual growth rate of 4.2%. IT, however, is gaining at 7% and will reach R120 billion in the same time.
Telkom wants to be the centre of the digital home, as well as the leading provider in the business, enterprise and government sectors, and become pre-eminent in wholesale, says Maseko. It is currently complying with a Competition Commission ruling that will see a functional separation of its wholesale and retail arms.
Technology mix
Armstrong notes its broadband plan offers speed and data capacity, with additional features such as free public WiFi and mobility, at affordable pricing. The technology of choice will be a combination of fibre, xDSL, 3G, long-term evolution and satellite.
Telkom expects the consumer broadband market to grow by around 13% to reach 2.9 million homes by 2030, from the 1.4 million that can currently be addressed.
Telkom will also rationalise its product portfolio, and manage the decline in voice revenue while moving its technology to IP, says Armstrong. In addition, the telco aims to fix its customer service offerings.
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