Telkom puts ‘victory in broadband’ at core of strategy

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Serame Taukobong, Telkom Group CEO.
Serame Taukobong, Telkom Group CEO.

Telkom today released its Integrated Report for 2022, which shows it has put “victory in broadband” at the core of its business strategy.

The report comes as Telkom is in discussions with rival MTN over a takeover bid of the former. The discussions are at an early stage, with Telkom and MTN saying there is no certainty the transaction will be consummated.

“Victory in broadband is the backbone of our strategy, supporting Telkom’s aspiration to become the leading broadband service provider in South Africa,” says Serame Taukobong, Telkom Group CEO, in the report.

“Over the past few years, we have invested in both mobile and fibre infrastructure assets to prepare for 5G, and our combined asset base sets us apart from our competitors.”

According to Taukobong, as at the end of FY2022, Telkom has more than 11 million total broadband subscribers – mobile at 10.5 million and fixed broadband at 500 000 − and 79% of the company’s fixed-line broadband customers are using 10Mbps and higher, supporting higher data consumption.

He notes Openserve is one of the market leaders in the South African fixed market, with approximately 840 000 homes passed and a fibre-to-the-home (FTTH) connectivity rate of more than 46%.

“This year has been a milestone year in terms of victory in broadband with the additional mobile spectrum we secured,” Taukobong says. “We obtained 20MHz of 800MHz and 22MHz of 3 500MHz for R2.1 billion. Telkom’s total spectrum portfolio now stands at 170MHz across all bands.”

He explains the newly-acquired spectrum will enable the firm to offer a credible 5G proposition. “The sub-1GHz enables us to deploy networks more efficiently and increase coverage.”

Telkom made a payment of R1.1 billion in FY2022, with the remainder being due when the sub-1GHz spectrum, currently occupied by broadcasters, becomes available.

However, this licensing process was subject to a court challenge by Telkom, which has since been settled.

Telkom says it opted for a forward-looking settlement with regulator the Independent Communications Authority of South Africa, addressing its principal complaints regarding ensuring fair competition in the sector, while providing a level of regulatory certainty.

Upwards for Openserve

Telkom points out Openserve’s stabilisation path continues and it’s turning around several years of revenue declines.

It notes the Openserve business evolved as customers migrated over the years from legacy to next-generation connectivity. Today, more than half of its revenue is derived from the new business, says Taukobong.

However, he says a pricing gap remains between the new business and the legacy business. “Revenue was relatively flat for the first time after several years of significant decline in the legacy business. This was underpinned by growth in high-capacity links for carriers, an increase in demand for fibre services, and a slowdown in fixed voice churn.”

The telco says Openserve continued with its growth trajectory in the fibre market, increasing homes passed with fibre by 52.7% and homes connected with fibre by 38.4%.

This is in line with its strategy to accelerate the FTTH footprint while simultaneously focusing on connecting homes, says the company, adding that in the second half of the year, overall fixed broadband customers increased for the first time in several years despite the decline in ADSL customers.

Openserve invested capex of R3.4 billion in modernising and expanding the network during the year. “This enabled a flexible, modular and scalable network architecture that has ensured Openserve delivers high-speed and increased capacity networks across South Africa, reflected in the increased fixed data consumption of 16.6% across our network,” says Taukobong.

“During the unrest experienced in KwaZulu-Natal and Gauteng in July 2021, our access network suffered multiple breaks. However, we did not lose any traffic on our core network due to our capability to use auto reroute restoration in case of fibre breaks in the network.

On the mobile front, the company says the segment continues to drive growth in the Telkom Consumer business.

This growth was achieved against the backdrop of an intensely competitive landscape and challenging economic environment, says the firm, adding that as the overall macro-economic constraints began to materialise, the prepaid surge slowed as the share of wallet spend plateaued.

“We continued to grow our prepaid customer base, with average revenue per user (ARPU) normalising to pre-COVID-19 levels in line with management expectations. In the postpaid consumer market, we grew the postpaid base and maintained high levels of ARPUs,” the company says.

“The legacy fixed-line business remains under pressure due to migration from traditional fixed-voice to newer technologies. The impact of the post-pandemic recovery is still evident in small and medium businesses. We remain encouraged by the growth in our non-connectivity/application services, which saw double-digit growth in the year under review with a focus on financial services, gaming and content.”

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