Telkom says it expects little future growth in the number of fixed-line telephones in South Africa as the market is "mature" at just over 2.7 million residential customers and two million business users.
"There are certainly opportunities in value added services but in terms of access penetration we have probably reached maturity," said CEO Sizwe Nxasana today in presenting the company`s results for the year ended March.
The number of Telkom lines declined by 0.7% in the year compared with a 10% decline last year, as non-paying customers were given the boot. The corporate world accounts for about a third of the decline in customer numbers, with the balance made up by residential users.
The result was growth of only 2% in the traffic Telkom carried last year and nearly R1 billion in bad debt, up a third from the year before.
Telkom has vowed to increase the revenue it sees from existing customers by broadening the range of value-added services it offers on top of basic telephony. But much of its hopes for future growth are rather pinned on data services, where revenue grew 18% in the last year.
The company has been spending an increasing amount of capital on IT infrastructure, to the point where IT was in the last financial year second only to baseline network capex. The result, it says, is the ability to offer hosting, application hosting and security services to companies.
It also reported a 16% increase in the number of permanent leased-line Internet connections in use during the year (to 88 000) and a 22% increase in the number of 2-megabit services in use (to 55 000). It expects this growth to continue.
The other area for future growth is expected to be Telkom`s 50% shareholding in Vodacom. For the first time this year the company took great care to emphasise its results as a group, treating Vodacom as an integral part of the organisation.
Although wary of future-looking statements as the company is to be listed early next year, Nxasana said the 20% contribution the Vodacom shareholding made to group revenue could only increase. Vodacom is continuing its expansion into the rest of Africa and will launch new services such as GPRS (general packet radio service) this year.
Vodacom`s important average revenue per user (ARPU) declined 12% to R182 per month for its 6.56 million South African users in the last year, but compares with less than R60 per user Telkom earned every month.
Vodacom growth, however, is unlikely to make a bottom line contribution as soon as next year. While Telkom`s total capital expenditure will continue to decline the capital spent on various Vodacom networks increased by 32% last year.
But the R2.113 billion of Vodacom capex attributable to Telkom could be offset by a windfall if the company succeeds in a pending legal matter. A long running dispute between Telkom and US company Telcordia, which was to install a workflow system for the local operation, went into arbitration in May and Nxasana says could be settled within months.
"We are still very bullish that [the arbitrator] will find in our favour," he says. Telcordia is claiming R1.5 billion from Telkom. Telkom`s counter-claim for damages amounts to R1.7 billion.
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