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Telkom Annual Results 2011 - A win for ADSL?

Telkom released their annual results on the 13th of June. The headline figure, operating revenue down 5.2%, caught most of the headlines. The reasons for this decline are detailed in the report. Let's first look at the figures:

  1. Voice revenue decreased 16.8% to R13.7 billion.
  2. Data revenue increased 7.7% to R10.7 billion.
  3. ADSL subscribers increased 16.1% to 751,625
ADSL is increasingly playing a large and profitable role in Telkoms portfolio. It stands to reason that Telkom will attempt to further monetize this commodity via improved services and differentiation in the market. Nombulelo Moholi, the Group Chief Executive Officer of Telkom [2], goes so far as to mention this in the report. Saying that Telkom could differentiate themselves if they, "provide higher speeds and end to end reliability " [1]. She also points out that Telkom have been investing in their infrastructure for some time and this is now paying dividends, "years of investment in our network has allowed our data revenue to grow 7.7% [1]". We are sure Telkom sees that only with continued investment will they be able to maintain such strong growth.

It is with interest that compares this report with a similar one released by BT, the British Telecommunications provider, in 2006. Where "Total fixed-to-fixed voice call minutes in the UK market as a whole declined by 3% in the 2006" [3]. At this point BT decided to concentrate their resources on providing a large and powerful network to support ADSL and fibre Internet connections. This has resulted in them maintaining their lead in the UK market.

As well as our calls for increased determinism and transparency in the SA broadband market, which Telkom have started to do with their newest ADSL availability checker, here are our suggested investment areas for Telkom:

  1. Make ADSL Broadband ubiquitous
    • Increase the number of exchanges, allowing Broadband to reach more homes at a faster speed
    • As more exchanges can be costly another approach could be Fiber-to-the-cabinet and then VDSL [3] (edit 2011/06/20)
    • Enable exchanges in smaller towns - This will enable organic growth in the ADSL Market
  2. Look to foreign markets for their Product strategy
    • As demonstrated in the BT Report [5] the problems facing the South African telecommunications industry are not unique.
  3. Open up exchanges to the LLU Market
    • This could have an affect on the pricing and competition in the market.

The Team

[1] Telkom - Annual Results 2011
[2] Profile of Nombulelo Moholi
[3] VDSL
[4] BT Annual Report 2006
[5] BT's profits decline

Posted 2011-06-16 13:21:00 by Ian Saunders
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