In a move to boost its revenue streams, Telkom has entered into a partnership with Old Mutual to provide Telkom's prepaid customers with funeral cover.
Under the deal, Telkom customers on the Sim-Sonke and Telkom More prepaid plans will qualify for the R10 000 funeral cover by recharging with R100 or more airtime, through single or multiple recharges amounting to R100 in one calendar month, opting in and nominating a beneficiary.
The loyalty funeral cover will start at the beginning of November and will be valid until the end of that particular month.
For the year ended 31 March, Telkom reported a 22% decrease in leased-line revenue, as well as an 11.9% decrease in fixed-line voice and interconnection revenue.
Commenting on the new offering, World Wide Worx MD Arthur Goldstuck says: "I wouldn't call it a smart move as much as an inevitable move. It is not a case of Telkom moving away from its core business, but rather of leveraging its customer base to generate an additional revenue stream," he points out.
According to Goldstuck, telcos are all facing a squeeze of revenues as voice use declines relative to data, and the margins on data continually fall.
"They are, therefore, under pressure to find new revenue sources, and funeral is a handy standby in South Africa."
He notes there is great appetite among South African consumers for funeral insurance - far more so than for life insurance - and retailers have been exploiting this for some time.
"Once they have a large mass-market customer base, they inevitably introduce financial services products, with funeral insurance the prime among these. There is no reason the telcos shouldn't follow in their footsteps," Goldstuck notes.
Old Mutual has developed a micro-insurance voucher system that will underpin this solution, enabling customers to opt-in, nominate and manage a beneficiary, track their loyalty funeral cover and even submit a death claim using the Old Mutual app or USSD.
The move comes at a time when there is a growing trend for telcos to collaborate with financial services companies and vice versa in order to gain traction.
Telkom CEO Sipho Maseko says diversification into value-added services, such as financial and mobile payment, as well as content, is an "irreversible trend" for traditional telecoms companies.
"This innovative offer is a South African first. While competitors may offer paid premium insurance to their customers, Telkom will be rewarding customers for their airtime spend with funeral cover at no additional cost, from one of the leading insurers in the country, Old Mutual," Maseko says.
SA's first mobile operator Vodacom is also tapping into the local insurance market valued at R61 billion. The telco offers its customers life and funeral insurance. Vodacom's life insurance products range from R200 000 assured up to R10 million. The average premium for Vodacom's life cover insurance is R250, while the average price for a funeral policy is R150.
Dave Macready, CEO of Old Mutual SA, says: "I am excited about this partnership [with Telkom] which is a great example of the effective digitalisation of financial services. Giving South Africans easy access to insurance products through their mobile devices not only reduces cost, it accelerates financial inclusion, which is critical to reducing poverty and inequality which contributes to boosting our nation's development and future financial wellbeing."
Qualifying customers will be required to opt-in for the funeral cover. Their personal details, as well as a nominated beneficiary, will be captured, and the customer will then be eligible for the cover for as long as they maintain a monthly airtime spend of R100. In the event customers fall short of the R100 airtime spend for a particular calendar month, they will not be eligible for the funeral cover during the following month. Once the required spend is met again, cover will be reinstated for the subsequent calendar month.
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