Despite what brave execs say, losing 20% of your customers in a decade paints a bleak future.
Telkom executives, especially its revolving door of CEOs in the past five years, have always put on a brave face when it comes to future outlook.
They would “defend” its fixed line subscriber-base with whatever it takes. In fact, Reuben September defined the “defend and grow” strategy while he was at the helm. Even before September, Papi Molotsane would speak euphemistically of “fixed-mobile substitution” – a trend you would see itemised in nearly every results presentation from the late 2000s onward.
As it turns out, Telkom hasn’t defended its fixed line base with whatever it takes.
Telkoms share price has plummeted. Today it hit a low of R15.64
A decade ago, there were 1m more fixed lines than there are today. Put another way, 20% of Telkom’s customer base has simply evaporated in ten years.
Fixed line subscribers
The best defence Telkom could muster (in the face of a rising cost base)? Increase line rental steadily every single year.
And there is no retention strategy (have you ever tried shifting insurance providers?!). Earlier this year I took up one of Telkom’s free-ADSL-for-three-months offers. Aside from the billing nightmare due to antiquated systems, when I cancelled, there was not so much as a whimper from the call centre agent. No retention strategy. No discounted service. No incentive to keep the subscriber. A nod, a few scripted notifications about the 30-day notice period, and done. In that five-minute call, Telkom said goodbye to at least R5 000 in revenue from me this year.
Extrapolate that against the 179 000 subscribers lost since last September, and you’ll get a number close to R1bn in lost revenue. Vanished.
No wonder you pay nearly R150 a month for a phone line you hardly use.
But it’s in the detail where the numbers get even scarier.
As at September 30, there were 3 894 000 fixed lines in South Africa. Of this number, 571 000 are low-margin, low-spend prepaid customers. There are also 97 000 payphones in this number (they still exist?!). And 761 000 ISDN lines which businesses (and especially broadcasters) use.
That takes the core number down to 2 465 000 lines. Here’s where the severity of the decline is really obvious: What happens if you exclude the 841 831 ADSL subscribers who, remember, are forced to have an analogue fixed-line if they want broadband (one of the many reasons I cancelled).
And those 841 831 ADSL subscribers are not just normal residential consumers like you and I. Telkom explicitly states the number excludes its own employees, but “includes business, consumer, corporate, government and wholesale customers”. Remember the ADSL base is being largely propped up by SMMEs who are desperate for the relatively stable connectivity it offers.
Now that number looks plainly dire: 1 623 169.
Just more than 1.6m fixed-lines in a country of 51m people, a country where mobile penetration is already at 150% (in terms of SIM cards in the market).
How many of those1.6m lines are small businesses and corporates? Even with VoIP, least-cost routing and new-generation PBX systems, there is still a need for a number of fixed lines for incoming and outgoing calls.
The subscriber numbers for the Closer annuity packages give us some insight. There are 814 888 of those (these are residential-only customers). But the numbers get murky here, and a number of these will also be ADSL subscribers (part of the 841 831 we’ve already removed from the base).
What number then? Could two-thirds of the 1.6m number be non-consumer?
Could there really be 500 000 residential phone lines left in South Africa?
How many people do you know with a Telkom phone at home (one that they’re not forced to have because of ADSL)?
Maybe even 500 000 is too many?
What if that core consumer base – the one supported by dozens of retail shops around the country – is even smaller?
What if you add SMMEs to the mix? What if 1m lines are SMME and residential customers (with 600 000 lines in large enterprise)?
Suddenly those Census numbers look incredibly optimistic, and Telkom’s future looks even bleaker than the most dire predictions suggest.
There’s another number too. Capital expenditure – what Telkom is investing in its network annually. If you thought the subscriber data was horrendous, these numbers are positively scary.