The deal between Telkom and MultiChoice, in terms of which subscribers to the operator's broadband services will get a free, IP-connected DStv Explora decoder, is seen as a way for Telkom to notch up its ADSL subscriber numbers. It will also allow it to gain a foothold in the content-on-demand (COD) space.
Market analysts also see the deal as beneficial to MultiChoice, with the broadcaster recently announcing an Internet-connected version of its catch-up service, a DStv Now application for smart devices, and a remote recording functionality - which all require a reliable, high-speed Internet connection.
Commenting on the deal, Telkom stated this morning: "Telkom and MultiChoice have entered into an exclusive six-month promotion that entails Telkom Internet broadband being bundled with the new IP-connected DSTV Explora decoder.
"The Internet functionality enables customers to access more content, including the latest TV series and movies, and to set recordings on the Explora decoder remotely. Customers will need to link their DStv Explora to their existing Internet router, either by Ethernet cable or using a WiFi connection."
The bundled deals will be available from Sunday (23 November). Existing Telkom Internet customers who upgrade their ADSL to 10Mbps or faster will get a free DStv Explora on a 24-month contract, while new-to-franchise Telkom Internet customers will get a free DStv Explora when buying 10Mbps or faster ADSL, on a 24-month contract.
"Customers will benefit from faster, high-speed Telkom broadband and more fixed-line data. Furthermore, the free DStv Explora and WiFi connector will allow customers access to the enhanced DStv catch-up catalogue and additional functionality."
MultiChoice media manager Trinesha Naidoo would not reveal any details of the agreement at this stage, saying: "We can confirm that MultiChoice and Telkom have entered into a partnership to provide customers DStv Explora decoders and Telkom's broadband service. More details of our partnership with Telkom will be shared in a media announcement later this week."
In May, Telkom withdrew an invitation for interested bidders to apply to partner it to provide video-on-demand services, saying it would - at some stage - reissue the tender, which would be based on a business model more closely aligned to Telkom's revised business strategy.
Ideal fit
Meanwhile, market observers say the deal makes sense, given increased competition for MultiChoice in the broadcasting sector from new COD players, as well as giving Telkom an entry into the quad-play space, while bolstering its ADSL numbers.
Ovum senior analyst Richard Hurst describes the deal as "inevitable". "Over time, we have seen overtures from both sides, and I think this is a good fit. Telkom does have the fixed-line network to pull this off, so it should work. That's of course unless Neotel and Vodacom, or someone else, comes up with something that's totally new - that's always the danger."
In terms of the deal being a way for Telkom to boost its ADSL subscriber numbers, Hurst says the company should have seen a higher penetration rate by now, but adds it was not aggressive enough in pushing its broadband services in the past.
"They seem to have woken up now, realising they are the ones who are in a position to deliver this [fast Internet services]," he says, pointing to Telkom's emphasis on its ADSL numbers during its interim results presentation, earlier this week.
Telkom reported on Monday that its ADSL subscribers increased 7.4%, to 965 046, during the first half of its financial year. In contrast, the operator's fixed-line subscriber numbers and revenue continued to slide, prompting analysts to urge Telkom to focus on data services as a primary revenue-spinner.
Independent telecoms analyst Spiwe Chireka agrees the deal gives Telkom a foot in the door of the COD space, which could be a lucrative source of income for the company. "Telkom is trying very hard to position itself in that part of the market. Quad-play is one sure way of playing in this space."
She points out telecommunications companies in general are keen to adopt over-the-top services, such as COD, but argues the local model for adopting these services is not yet clear. "While digital TV has not yet been launched and thus we do not have multifunction set-top boxes, this is one alternative for taking advantage of this space."
However, Chireka warns the deal is likely to yield limited benefits for both companies, as this is a niche offering targeted at high earners.
Telkom previously announced it is 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.
COO Brian Armstrong said in August 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.
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