Telkom, which has a multi-pronged approach to rolling out converged solutions, is hindering its own ADSL ambitions because it has failed to address the continued fall in the number of fixed-lines.
The company, which yesterday issued its annual results for the year to March, has highlighted ADSL as an important growth area. It also noted it will roll out other solutions, such as fibre, long-term evolution (LTE) and LTE-Advanced, on a market-by-market basis, depending on which solution suits the area best.
Part of the telco's plan to increase broadband penetration to is to run fibre-to-the-home in upmarket areas such as Cape Town's Constantia, and land LTE-A in suburbs where residents are contracting out for fibre trenching. However, its copper network is not being neglected as it seeks to sweat this asset and increase the number of ADSL subscribers.
CEO Sipho Maseko said, during the results presentation yesterday, that Telkom had - for the first time - breached a million ADSL subscribers as users of the fixed-line broadband service gained 7.9% during the year. He noted ADSL was an "important market" for Telkom and it would drive it further in a bid to "democratise" broadband. "Broadband is a key economic stimulator; we need to get it out wide."
Growth ceiling
However, World Wide Worx MD Arthur Goldstuck says ADSL will not work as a solution to make sure the majority of South Africans - who cannot afford the newer fibre and LTE technologies - have fixed broadband. This, he says, is because Telkom has set a ceiling on the number of customers it can acquire in the ADSL space.
ADSL will not die out as it is still a vital technology for small and medium businesses, but Telkom is freezing out the majority of South Africans from fixed broadband, says Goldstuck. As an alternative to ADSL, fibre will only start becoming pervasive by about 2020 as economies of scale kick in, he adds.
Ten years ago, Telkom had a fixed-line installed base of 5.5 million; a figure that had fallen to under 3.5 million by the end of March 2015. Year-on-year, the number of South Africans with fixed-lines had declined 4.9%, and the number of fixed-lines that are also being used for ADSL hit 29% of the installed base.
As a result, Goldstuck says, Telkom has a total pool of potential ADSL customers of 3.5 million, a figure that is declining yearly. He anticipates it reaching this ceiling in about five to 10 years from now, but notes this will not concern Telkom as it still provides it with a growth opportunity. "This is part of the problem with their thinking."
Goldstuck adds the decline in fixed-line penetration is because Telkom needs to adjust its pricing strategy and stop charging on line rentals and move to a consumption strategy. He says Telkom has been in a comfort zone and has not addressed fixed-line haemorrhaging effectively.
Missed opportunities
Ovum analyst Richard Hurst says Telkom missed an opportunity to drive fixed broadband "like crazy" a few years ago when it did not take advantage of a captive market. "We're missing the [fixed] broadband opportunity."
Hurst notes Telkom's laggard status, which was filled by mobile operators, was due to a reluctance to invest heavily. The company is also following a cautious investment approach, with CFO Deon Fredericks yesterday saying it will continue to make sure its spending is efficient.
BMI-TechKnowledge director Brian Neilson notes the decline in Telkom's fixed base mirrors that of the uptake of its mobile offering, which has grown from under 500 000 in 2011 to more than two million subscribers now. He says mobile should have gained steam faster, but is compensating for a lack of fixed-lines to some extent.
Neilson says Telkom is protecting its copper asset, even though the installed base is dwindling, as it needs to play catch up in the fibre arena, which has no clear leader. He adds Telkom's upgrades to its network will give ADSL a new lease on life and it can go past the million user mark.
Telkom's multi-pronged strategy is the correct one and any growth in the ADSL base is a win for Telkom, says Neilson. "They're doing the best they can under the circumstances."
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