Telkom SA targets e-commerce, big data, fintech investments to generate new revenue streams

SOUTH AFRICA – With revenue and profit margins from core services coming under pressure due to intense competition, Telkom SA is seeking opportunities in e-commerce, big data, gaming and fintech, to generate new revenue streams.

In its integrated report 2021, Telkom says it’s searching for new investment opportunities to provide it with financial stability while transforming to become an end-to-end digital provider.

Telkom’s desire to evolve comes on the back of a growing trend in telecoms, which has seen mobile operators transform their operating models to drive growth through new digital services for consumers and offerings for enterprises.

Outlining Telkom’s strategy in the integrated report, outgoing CEO Sipho Maseko says the telco is constantly reviewing its master plan, to ensure it remains relevant in the rapidly-changing operating environment.

The CEO noted that the telephony group’s strategy is being achieved through five strategic pillars, portfolio diversification, integrated solutions, victory in broadband, operational efficiency and technology innovation.

According to Maseko, the five pillars capture the transformational changes to Telkom’s core business by moving from voice to data, from legacy to fiber, fixed wireless to mobile, and from connectivity to IT services solutions and digital ecosystems.

Commenting on the portfolio diversification, he explains that Telkom is targeting to expand and invest in e-commerce, big data, gaming and financial technology.

“We seek opportunities to generate new revenue streams from existing and emerging digital services. Each opportunity will be considered on its merits, and will inform the decision to build, buy, or partner.”

Telkom group chief financial officer, Dirk Reyneke, said as traditional fixed-data revenue continues to decline, the company needs to migrate customers from traditional high-margin products to next-generation products.

“This strategy has proved successful, as we witnessed an increase of 30.8% in new fixed-data revenue, compensating for the 22.2% decline in traditional data revenue. We have now reached the inflection point where the profitability of new revenue streams exceeds that of our legacy revenue streams.”

Reyneke added that Telkom will continue to invest in growth areas, and it expects to spend between R8 billion to R8.5 billion (US$574 million) CAPEX a year while continuing to grow its revenue.

Turning to e-commerce, Telkom says in line with the strategy of driving a digital-first approach to business, it has since launched a number of digital platforms that have been welcomed on the market.

“Our goal is to shift revenue from pure connectivity products towards an e-commerce-based revenue stream across all SME sectors’

Among them is the flagship Yep!, a digital marketplace for small and medium enterprises, launched in June 2021.

Telkom says Yep! was the first phase of its e-marketplace strategy but now the business is scaling.

“We want Telkom to be the go-to place for all South African small and medium businesses to connect and grow their businesses. Our goal is to shift revenue from pure connectivity products towards an e-commerce-based revenue stream across all SME sectors. The COVID-19 pandemic has further increased the urgency to accelerate small and medium businesses into e-commerce platforms,” says the telco.

“The business is well-positioned to respond through the current solutions already available through Yellow Pages. The focus going forward will be to initially equip customers with an online store through Yep!, customized websites and digital performance marketing services.”

This, the company says will help enable small and medium businesses to sell their products and services online without the complexity and time required to set up a traditional e-commerce site.

“As the uptake of e-commerce and the marketplace accelerates, we will expand access to our adjacent product offerings in IT, procurement and financial services through the platform.”

In the report, Telkom also details its broadband ambitions as another key focus area, as it seeks to grow revenue.

In the past year, Telkom has been baiting customers with broadband services, including the period when the country was in lockdown due to COVID-19.

In the year, Telkom saw 41% growth in mobile data revenue to R12.2 billion (US$838.8 million) supported by 25.6% growth in mobile broadband subscribers to over 10 million.

Now, as it seeks new investment opportunities in broadband services, it is continuing with high-speed broadband offerings, led by LTE and fiber, as part of its “value-rich” product suite, to meet the connectivity surge of consumers working and learning from home.

“Our mobile network expansion programme will continue, emphasizing 4G coupled with a deployed temporary spectrum in support of the COVID-19 response. Our strategy remains to lead on value-based pricing through experiential value-rich offerings. Leveraging entertainment streaming applications flanked by smart home/internet of things will result in a more competitive positioning in the market.”

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