Telkom sets sights on Cell C

Telkom is plotting another assault in the mobile space, targeting the number three position in the market currently occupied by Cell C.

In a presentation at an Investor Day in Pretoria, on Monday (4 August), Telkom chief operating officer, Brian Armstrong, said: “mobile remains a critical and attractively growing sector of the SA telecoms market”.

He said that goals for the group included being the “number 3 player in mobile”.

Armstrong said that the group aimed to generate a significant percentage of revenue from bundles, content and value added products by 2019.

He said that Telkom targeted 1.5 million homes connected with fixed and LTE by 2019.

However, Telkom has struggled with its mobile business since its launch in 2010, accruing only 1.8 million active mobile subscribers with a blended ARPU of R62.79.

Cell C meanwhile, has accelerated its subscriber growth in recent months, to 18.1 million at 30 June 2014.

In contrast, Vodacom recently reported a local subscriber base of 32.5 million, while in April, MTN reported that its South African operation reduced subscriber numbers by 824,768, bringing total subscribers to 24.9 million for the period ended March 2014.

MTN is expected to publish updated figures later this week.

Telkom Mobile a money maker?

Armstrong said that Telkom aimed to accelerate mobile break even and cash flow.

In June, Telkom reported that its mobile revenue increased 72.7% to R2.35 billion for the year ended March 2014 , lifted by mobile data revenue, up 80.2% to R656 million.

However, on Monday, Armstrong pointed to a mobile EBITDA loss of R1.3 billion, although up by 20%.

Because Cell C is not listed, it is not obliged to make its financial results public. However, the group reported year-on-year service revenue growth of 10.5% for Q2, 2014 driven by a 59% rise in subscriber growth.

Telkom also reduced mobile capex by 12% to R1.37 billion, while Cell C put its capex forecast for 2014 at R2.3 billion.

MTN/Telkom Mobile deal

MTN signed an agreement with Telkom in March 2014, which would see it take over financial and operational responsibility for the rollout and operation of Telkom’s radio access network (RAN).

The two companies entered into a Heads of Agreement (HoA) to enable each party to be able to roam on either party’s network.

The proposed transaction will allow Telkom to maintain a mobile offering that supports a converged product set in the consumer and enterprise segments.

As recently as May, Telkom CEO Sipho Maseko said 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 said.

“Bilateral roaming arrangements allow for increased footprint for both parties,” Armstrong said on Monday.

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Telkom sets sights on Cell C