Telkom to embrace fintech in ongoing drive to diversify
CEO Sipho Maseko says the fixed-line network operator plans to launch a suite of financial services by the end of 2019
Telkom CEO Sipho Maseko says the company is looking to enter the lucrative fintech sector as it continues its drive to diversify its income streams beyond the fixed-line business.
In an interview after the company’s annual general meeting, Maseko said Telkom is thinking “beyond mobile money” and will launch a suite of financial services by the end of 2019.
“We’ve spent a lot of time really thinking this through and penning the right partnerships so that we can offer integrated payment services and insurances services,” he said.
Telkom has a financial services strategy that will involve payments and insurance — “not just for its own sake, but to find a way in which we can leverage our capacity to bring down some of the barriers, especially for small to medium businesses to be part of the economy,” Maseko said.
Mobile network operators are increasingly adding digital services, including fintech, to their portfolio to offset the decline in the traditional voice businesses. SA’s second-largest mobile network operator MTN estimates that voice revenue will continue to drop by about 2% a year.
Maseko said Telkom’s intention is to develop products that increase competition, especially among small and big businesses.
“As more and more smaller players believe they have a shot to grow, they can take on some of the services that some of the bigger players offer. That’s how we’re thinking about financial services.”
The country’s largest fixed-line provider, Telkom has aggressively been growing its mobile subscribers, which stood at 9.7-million at the end of June. The mobile business contributed 25.7% in revenue in the 2019 financial year, up from about 3% in the last six years.
Telkom’s share price has grown 22.96% since January on hopes that the network operator’s fledgling mobile business will continue to win market share, and on expectations that the group will unlock value from its vast property portfolio.
Maseko said Telkom’s mobile business had benefited from providing a good data service, at more affordable prices, aided in part by their roaming agreement with Vodacom.
“Roaming helps us reach everyone because Vodacom has such an extensive network. The nature of the agreement we have with Vodacom is that they will not discriminate between a Telkom customer and a Vodacom customer,” he said.
As roaming costs increase, Telkom’s service needs to remain attractive and continue meeting customer expectations, which helps the company with managing its capital expenditure, Maseko said. However, “as the traffic grows in those areas, we will look to build our own towers”.
“The real challenge in the economy is that we have high levels of concentration,” he said.
US bank JP Morgan said in a report in July that Telkom’s board has improved the group’s returns on invested capital.
“This turnaround was supported by staff efficiency and repositioning of the mobile business,” the bank said.