Telkom's mobile arm, 8ta, has signed up 1.2 million subscribers since its launch last October, but has deactivated 400 000 SIM cards in the same time.
Telkom's mobile arm is a key growth strategy for the company, which is facing ever-decreasing voice revenue, a decline that has not been offset by data growth.
8ta has turned over R81 million, but made an operating loss of R1.1 billion in the year to March. Telkom expects 8ta's operating loss of R1.1 billion in the financial year to March to be higher in the 2012 financial year, says acting CEO Deon Fredericks.
Telkom has also pushed out the timeframe for 8ta to break even on an operating profit basis by a year, to 2014, and expects it to only be cash-generative in 2015.
The company has earmarked capital spend of R6 billion to roll out a network, but this amount could come in lower at the end of the five-year period. So far, 1 012 base stations have been constructed, with another 2 000 on the cards.
Distribution issues
Amith Maharaj, managing executive of 8ta, says the mobile company has disconnected about 400 000 SIM cards that were not generating revenue and were inactive. 8ta disconnects inactive SIM cards after 90 days.
Getting airtime into the channel has proven to be challenging and hampered growth, says CEO Nombulelo “Pinky” Moholi. Of the 1.2 million subscribers the company has signed up since launch, only 467 604 are still active on the network.
8ta has 74 377 airtime points of sale and 35 684 places at which SIM cards can be bought.
As a result, some subscribers who had bought SIM cards and had them registered in terms of the SIM card registration law were unable to buy airtime, says Maharaj. He says it was a “chicken and egg” situation.
However, Telkom has segmented the market in terms of density of sales and is educating spaza store owners, as well as rolling out branding to push airtime sales, notes Maharaj. He says the company is getting vouchers to distributors to kick-start the process. “There's a lot of kick-starting to do.”
Analysts have questioned whether 8ta will be successful as it is going head-to-head with operators such as MTN and Vodacom, which have the bulk of the market tied up and have spent 16 years rolling out networks.
Moholi is not surprised some people in the sector do not expect 8ta to succeed. She says Telkom has a history of not delivering on its strategy despite its detailed planning.
Making 8ta a success will not be easy, says Moholi, but Telkom is excited at the way the mobile operator has been received. 8ta will deliver growth for Telkom in the future, but these rewards will not be immediate, she adds.
In the second half of this year, Telkom will launch a converged mobile offering targeted at the enterprise market.
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