How Telkom’s broadband business has evolved
Telkom’s broadband business has seen a major evolution over the past few years, and while it may be bleeding legacy fixed-line and ADSL customers, its mobile broadband business is booming.
“It has been the primary focus to move customers away from legacy technology and move to newer technology,” CEO Sipho Maseko said during his presentation for the JSE-listed telco’s financial results, for the year ended 31 March.
“In terms of high-speed broadband growth, if you look at the broadband evolution, about five or six years ago we were absolutely exposed to what you would call legacy technology access network. The exposure was largely on the copper-based ADSL, and over the last three or four years, we have invested quite a lot of resources and value propositions to migrate as many of our customers as possible away from copper to LTE, which is fixed look-alike or wireless broadband,” he said.
“What you see is the LTE subscriber base is growing and we have at least a million broadband subscribers who are using LTE. Just that number alone probably represents what would have been our ADSL subscribers at our peak. We continue to harvest the ADSL base, migrating it either to fibre-to-the-home or to LTE.”
Telkom’s consumer broadband customer base, which includes ADSL, VDSL, LTE and fibre, increased by 8.4% to 1.7 million customers for the year to 31 March. However, when looking specifically at fixed broadband subscribers, which include xDSL and FTTH lines, the group saw a 13.6% decline in customers to 847 650.
Internet all access subscribers, which includes Telkom Internet ADSL, ISDN and WiMAX subscribers, also dropped by 11.4% to almost 507 200 customers.
ADSL customers took a big hit, dropping 22.7% from 454 000 a year ago to 351 000 at the end of March 2019, while VDSL and fibre customers only increased by 4.5% from 201 000 at the end of March 2018 to 210 000 this year.
However, when looking at mobile broadband subscribers, Telkom saw a 75.8% increase year-on-year to 6.4 million subscribers. Mobile broadband traffic also grew by 88.5% over the year to 362 petabytes (PB).
In the smart broadband category, Maseko said fixed wireless access (FWA) and MiFi customers grew 25% over the year, to almost 1.1 million, and the group also expanded its voice-over-LTE (VoLTE) offerings across the LTE portfolio.
Maseko said over 60% of the home broadband base had migrated to uncapped products.
“It is important because as we have a more resilient network, we will be able to offer uncapped and unlimited value propositions to our customer base. There will be a lot less metered services and a lot more uncapped and unlimited voice and data because that is actually what customers are looking for at the right price point, and we are seeing the results of that.”
Telkom Mobile saw an 85.9% increase in its mobile subscribers, over the past 12 months, bringing its total customers up to 9.7 million. Maseko said the group’s FreeMe product, which has successfully been pulling in customers since it was launched in 2016, continues to be very successful and now 86% of postpaid customers are on FreeMe.
Telkom also sold 7.6 million FreeMe bundles during the 12 months.
“We have also introduced much smaller FreeMe bundles, day bundles, hourly bundles or weekly bundles that have proved quite popular and successful in the market.
“We continue to invest in the mobile business, making sure that over time they depend less and less on roaming. We spent about R3 billion on mobile capex last year and the performance bares testimony to the worthiness of the investment,” he added.
This was a 29.8% increase on the R2.3 billion it spent the previous year and 55.5% more than the R1.9 billion spent in the 2017 financial year.
“The network is resilient, we have a 4G network that we have deployed on the wireless side and on the fixed side we have an all IP network. It’s not just a 4G access network, we also have 4G backhaul and that is one of the reasons that underpinned the growth that you see in our mobile business. It is not microwave-based backhaul but 4G backhaul that is able to carry scalable data traffic.”
In terms of Telkom’s wholesale broadband business, Openserve, Maseko said the strategic focus areas have not changed: “We need to modernise the network from legacy to new, commercialise the network and transform service delivery.”
He noted the company had invested in both the local optical transport network and the national optical transport network to produce “a resilient core that has been modernised” which enables Telkom to be able to carry data traffic “from 10GB to 100GB without having to incrementally invest a lot more capex”.
“The network modernisation continues and I think that over the next two to three years it will be complete, which then will give us the right national footprint in terms of being able to carry both 4G traffic and 5G traffic across the entire country,” he added.
In terms of fibre deployment, Openserve now has 163 800km of fibre deployed, which is a 4.1% increase on a year ago. Fibre-to-the-cabinet reached almost 2.4 million cabinets, an increase of 6.8% year-on-year. Fibre-to-the-home was up by 20.7%, to 430 659 homes reached, and fibre-to-the-premises increased 8.8%, to 2.8 million premises.
“One of the reasons behind the success in mobile is that we have put in a lot of fibre backhaul to be able to carry quite a lot of the traffic that we are generating and that is going to be a very important metric. If you have a 4G access network, you had better ensure you have 4G backhaul otherwise you are going to have big problems. I think Openserve has really been able to expand that optical footprint in the year under review,” Maseko said.
“There are a lot of customer products and services producing a lot of traffic that has to move in one form or another across the totality of the network.”
He is not kidding when he says it’s a lot of traffic; in fact, around 999PB in terms of fixed-line broadband data consumption over the year. This was a 20.7% increase in traffic compared to 828PB the previous year and a 62% increase in the traffic carried two years ago, of 617PB.
“As the data traffic increases, the incremental investment that you will need to make on the network will not be as large because it is a scalable, expandable network that we have,” Maseko said.
Openserve now has 7 018 fibre-connected base stations, an increase of 3.3% year-on-year, and the Ethernet business grew 55.6% to over 37 000 services connected. The group also improved its connectivity rate for fibre to 38.4% and is focusing a lot less on passing homes and focusing more on connecting homes, reaching over 165 000 homes by the end of March.
In terms of the evolution of broadband connections, the group has seen a 15.9% decline in copper access connections but a 51.3% increase in fibre access connections.