Telkom calls time on copper cabling
The telco group is shifting its customers to fibre and mobile — and is on the hunt for fibre-based acquisitions
Telkom is expected to phase out almost all its copper-based networks by 2020 as the telecommunications group steers towards newer technologies, says CEO Sipho Maseko.
"Copper is still quite big in the network, but I think over the next two to three years we’ll see an acceleration of that migration," says Maseko, adding that the company is preparing for the 2020s.
"We’re using, in a sense, 2018, 2019 and 2020 to get to a point where 90% of our network is ... either LTE [4G] or fibre, and we’ll be able to deliver a different experience for our customers."
Telkom wants to shift customers off outdated copper-based broadband digital subscriber lines onto its faster fibre network and mobile offerings.
It said in its annual results for the year to March that it has deployed more than 157,400km of fibre nationally, with more than 2.5m premises connected.
In the year, earnings before interest, tax, depreciation and amortisation dropped 3.6% to R10.5bn, though revenues accelerated in the second half.
The migration to new technologies is necessary, says Maseko, because the best speed a copper line can offer is 10MB/s "if you’re really lucky".
It will normally range between 2MB and 4MB/s.
"Yet with the newer technologies like LTE and fibre, the entry-level speed is 10.5MB/s, and people are willing to pay more for a better speed."
Maseko says Telkom is also looking for acquisitions to "reinvent" its portfolio.
"We have the balance sheet [for more deals]. If you look at the operating free cash flow of the company, Telkom generates jolly good cash actually.
"So we’re not stranded for cash, it’s more going to be around how productively we deploy that cash."
Telkom’s free cash flows improved from a deficit of R137m in its 2017 financial year to a gain of R501m in 2018. Its cash balances rose 78% to R2.7bn, and the group raised R1bn by selling a bond in March.
If Telkom decides to bid for a fibre operator, it will probably encounter stiff competition.
Other mobile operators, including Vodacom and Cell C, are also looking for tie-ups with fibre companies.
Mergence Investment Managers portfolio manager Peter Takaendesa says there appear to be "some green shoots" emerging at Telkom, which recorded a better second-half performance.
Telkom’s new business units, including fibre and mobile, are starting to gain momentum and this will help offset the decline in the traditional fixed-line voice business, he says.