Telkom faces fixed-line flop | ITWeb

Telkom is losing fixed-line customers at a faster rate in comparison to previous years, according to Business Monitor International's (BMI) latest report on SA's telecommunications sector.

In its fourth quarter report on the local telecoms market, industrial research group BMI envisages a total decline of 3% in landline usage. The research group says SA incumbent Telkom, in its results for the financial year ending 31 March, reported a decline in demand for prepaid PSTN lines.

According to BMI, this had been an important growth area for the operator.

Cellular takeover

Telkom spokesperson Pynee Chetty says the decline is “simply because of the uptake of mobile phones”.

Pieter Kok, a senior research analyst at IDC, agrees, saying Telkom will continue to experience a decline in the number of landline users, primarily due to people becoming more used to making their voice calls from a mobile phone rather than a fixed line.

“I see the trend being irreversible because of the dramatic increase in cellphone usage over the years”, says Kok.

He adds that the perception people have about Telkom is the other reason why customers are shunning the fixed-line operator. “Generally, the public has this perception of Telkom as being expensive while offering poor service to the clients. It is going to be a mammoth task for the fixed-line provider to change the public's view of it.”

Stiff competition

From a broadband point of view, Kok says there are more attractive mobile broadband options than Telkom's ADSL. “I can't really say the fixed line will soon be obsolete, but people are becoming less and less dependent on it.”

Cell C said this week it will unveil faster broadband in the form of '4Gs', which is an improvement on 3G, although not full 4G, as the standard hasn't been clearly defined by industry. Kok says he doesn't see Telkom fixed-line competing with this.

Telkom recently upgraded its network and now offers customers ADSL speeds of up to 10Mbps.

Presenting its financial results for the year ending 31 March, Telkom said the continued competitive pressure in the voice market had resulted in the decline in traffic revenue streams. “This is as a result of our drive to offer significant value through annuity products, managed network services and virtual private networks, which shifts traffic revenue into other revenue streams”.

The fixed line operator added that market penetration, which was at 9.1% in March 2009, had dropped to 8.7% after a year.

Growth spurt

BMI says SA's broadband penetration rate had seen an increase from the close of 2009 to the fourth quarter in 2010. “Subscriber base was around 1.12 million at the end of 2009. This is equivalent to a penetration rate of 4.3%”.

The firm adds that during 2009, the SA broadband subscriber base expanded by over 185%, and attributes much of this growth to the rapid increase in the number of mobile broadband customers.

“By the end of the year, mobile broadband customers accounted for 70% of the total market,” says the report.

For 2010, BMI also anticipates SA's broadband development to experience 50% growth, enabling the penetration rate to reach 6.4% by the end of the year.

Focusing on the 3G subscriber base in SA, BMI forecasts the mobile market on the whole to remain static during the last quarter of 2010.

This trend, notes the report, will partly be a reflection of moves by the operators to deduct inactive prepaid customers from their reported totals.