Telkom not-yet turnaround


How can it be, that in 2015, Telkom still doesn’t seem to understand broadband is a volume business?

Last week was a good one for Telkom, which announced unusually impressive results, after years of haemorrhaging money. Headline earnings are up 60%, shareholders are getting a dividend for the first time since 2011 and the share price has surged to six times from what it was when CEO Sipho Maseko took the job in 2013.

The biggest news last week, arguably, is that Maseko is ready for the next big battle to make Telkom a 21st century company: taking on the unions.

Telkom, as any analyst will tell you, has too many staff to compete in this new age and needs to find a way to trim its workforce. A cut of 7 800 staff, or 42%, is Maseko’s goal, but he will have to deal with the Communications Workers Union, who this month burnt tyres outside MTN’s head offices.

However Maseko clearly has the government backing for such a bold move, or he wouldn’t be doing it – as the logic goes whenever a rational person tries to understand the ANC government’s motives for doing things. It’s kind of like parastatal Kremlinology.

A lots of complimentary things have been said about the CEO this week. I’m not taking anything away from those achievements, which no one could have predicted for Telkom in the last few years. But if you look at Telkom’s pricing for itsfibre networks, you just have to scratch your head. How is it that the operator which has the most to offer, conversely offers the least to its customers?

For a 20 Megabits per second (Mbps) line with 50 gigabytes (GB) of data, Telkom charges R999. Compare that to the package I have just switched to, using  Fibrehoods’ aerial fibre and Vox Telecom as my ISP. For R850 a month, including R350 line rental (Fibrehoods only offers 100Mbps connections), I get 250GB of data. Vumatel, the little network builder that started this whole fibre privatisation rush last year in Parkhurst, offers a range of lines speeds from 4Mpbs to 1Gbps. Vumatel is an “open network,” meaning any ISP can offer their services. One such  packages is a 20Mbps uncapped package, with a free router, for R799 a month from small ISP Cool Ideas.

Since I last checked the Telkom site two weeks ago – when it only had 20Mbps and 40Mbps listed – it now offers a 10Mbps line with 50GB data for R699; as well as 100Mpbs for 200GB of data a month for R1 799.  The former package pales when compared to what an ISP like Cool Ideas  that only launched in 2011 offers; while the latter is similar to my own, except twice the price.

But here’s the kicker: Telkom wants you to sign a 24-month contract. For all its packages, according to its website. All the other, more nimble ISPs know that fickle consumers don’t want to be tied to contracts in this age of prepaid data. Why trap yourself into an inflated price for a fibre deal for 24-months when the prices are plummeting?

Instead of offering products that are able to compete against this new competition, Telkom is bizarrely offering its customers less value while charging them more. Telkom appears to thinking like it’s 2001 and still has exclusivity over us poor citizens.

And that is the most worrisome sign for me about Telkom right now, however impressive the recent turnaround has been.

The future of telecoms is fibre and Telkom, with the biggest installed fibre network, are the laggards. For the first time Telkom’s exclusive access to customers is being threatened by these new fibre networks, including Dark Fibre Africa, Vumatel, Fibrehoods and all the ISPs that have sprung up to service the savvy users on these new networks.

Telkom’s response – as demonstrated by its pitiful and expensive offerings – is arrogant and lacklustre. It’s going to be interesting to see how this unfolds.


About Author

Toby Shapshak is editor-in-chief and publisher of Stuff, a Forbes contributor and a Financial Mail columnist. He has been writing about technology and the internet for 20 years and his TED Global talk on innovation in Africa has over 1,5-million views. He has written about Africa's tech and start-up ecosystem for Forbes, CNN and The Guardian in London. He was named in GQ's top 30 men in media and the Mail & Guardian newspaper's influential young South Africans. He has been featured in the New York Times. GQ said he "has become the most high-profile technology journalist in the country" while the M&G wrote: "Toby Shapshak is all things tech... he reigns supreme as the major talking head for everything and anything tech."

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