Telkom snub shows battle ahead

Telkom's recent attempts to muscle in on Joburg residents' plans to establish data networks to their homes show just how much pressure the fixed-line telecoms provider is under when it comes to finding lucrative new avenues for growth.

Last Friday, Telkom surprised the community of Joburg suburb Parkview with the launch of its mobile-based service, LTE Advanced, which offers high-speed internet at R1399 a month for 100gigabytes of data over three years.

It lost its bid to become the backbone fibre network provider to Parkview when the residents' association chose Dark Fibre Africa, an open-access network provider that has planted 8000km of fibre across South Africa. Telkom recently shelved its plans to roll out fibre-optic cable to nearby Parkhurst.

High-speed data lines to homes for movies, security systems and phone calls is becoming a battleground for operators such as Vox Telecom, Vodacom and MTN as previously lucrative voice revenue dwindles.

Parkview residents could make voice calls over the internet on fibre and "tuck away their Telkom landlines", said Steve Lenahan, chairman of the residents' association.

The roll-out of fibre-to-the-home services by other providers is a threat to Telkom, which this week reported a 0.5% decline in revenue from data connectivity services, to R2.7-billion for the half-year to September. The decline was due to increased competition, the company said.

Revenue from leased-line facilities decreased 21.3% to R741-million compared with R941-million last year as other operators continued to build their own networks and rely less on Telkom's network.

But revenue from ADSL internet services rose as a result of a 7.4% growth in subscribers - and Telkom has cleverly entered into an agreement that bundles its internet broadband with the new internet-connected DStv Explora decoder in a deal that could further grow Telkom's internet subscriber base. Fixed-line voice usage revenue, still a major business for Telkom, fell 12% to R3.6-billion as customers continued to use cellphones more. Telkom saw a 4.9% decline in the number of residential and business lines as companies cut costs. Operating net revenue grew 1.6% to R13.3-billion, operating expenses, excluding depreciation, declined by 2.4% to R9.2-billion and headline earnings per share improved by 14.9% to R2.62.

But could data networks to homes still be a solution for Telkom, even with the snubs it has experienced?

World Wide Worx founder Arthur Goldstuck said on TM Live's radio show that Telkom should target suburbs where competitors had not yet rolled out fibre-to-the-home networks. "They should be leading the competition because they've got the most capacity for rolling out fibre in this country," he said.