Telkom CEO Sipho Maseko says that Telkom Mobile is not sustainable in its current format.
“On the mobile side we experienced continued financial losses, and a standalone path is not sustainable going forward,” Maseko told staff on 12 May 2014.
Telkom is currently negotiating a network sharing agreement with MTN, which will limit Telkom’s investment in its mobile network. Maseko hopes that this deal will make Telkom Mobile more sustainable.
Launched in 2010, Telkom’s mobile arm, which underwent a name change from the original 8.ta to Telkom Mobile, has underperformed from the get-go.
Telkom’s group interim results for the six months ended September 2013 showed that active mobile subscribers stood at a mere 1.598 million with a blended ARPU of R58.81.
This compares to rivals, Cell C, at 16.6 million subscribers, Vodacom with approximately 31 million, and MTN, with 24.9 million.
Telkom’s capex on its mobile business in the interim period was at R815 million, with the likes of Cell C forecasting a capex spend of R2.3 billion in 2014. Vodacom is ramping up capex spend to R9 billion, from around R7 billion before, while MTN’s capex spend in 2013 was at around R7 billion for its SA unit.
Telkom’s boss said that the three key pillars of the groups strategy going forward would include being the ‘centre of the digital home’, “So that is largely a retail play in consumer, combing both fixed and mobile,” he said.
He said that Telkom would also aim to lead in business enterprise and government.
On the wholesale side, Maseko said: “how do we make sure that the invincible network that we have, can be accessed by a whole lot of other retailers, so that we can gain greater utilisation of our network, generate a lot more revenue, and be able to invest in capex to further strengthen the network going forward.”
Wayne McCurrie, portfolio manager at Momentum Wealth, painted a bleak picture for Telkom’s mobile arm.
Speaking on CNBC Africa, McCurrie said: “They must be burning up hundreds of millions, if not billions of rands.”
He said that the “glory growth days” of the cellular market is over.
“They hit full saturation many years ago, and the two smaller players come into the market and they want to grab 10% or 15% or 20% market share – I do not think it is viable from a shareholder perspective,” he said.