Telkom Integrated Annual Report 2017

The number of homes passed with fibre (FTTH) increased by 169.7 percent to 219 825 homes, as we improved our deployment approach and focused on gated communities and key suburbs. Of this, 40 627 homes benefited from our accelerated refreshing programme. This translates to a connectivity rate of 18 percent (FY2016: 10 percent). Our connectivity rate was higher this year, at approximately 23.4 percent, reflecting our increased efforts to commercialise our network. This was also supported by an extension of our fibre resellers, which increased to 144.

We increased the number of fibre end-point connections to businesses to 52 755. This allowed us to provide multiple services with high-speed links to major corporates in South Africa, catering for their major site requirements as well as lower-speed fibre-based metro ethernet links, for the branch connectivity.

This sound performance was driven by a significant demand and uptake in fibre solutions as customers increasingly see fibre as a cost- effective, high-bandwidth medium that fulfils their current and future needs.

We increased the number of fibre links to base stations to 5 928, which provides services to mobile players. Our pricing and engagement strategy continued to make headway in reducing self-provisioning, resulting in an increase in orders from our customers. The strategy stimulates growth in our megaline circuits and other products that service the requirements of our clients at the base stations.

While we drive the fibre rollout, we continue to see a market need for using our existing network, enabling access to internet at the required speeds. To this end, we have seen an increase in fibre to the cabinet by 37.2 percent to approximately 2 million.

Customer experience remains a top priority to us. With our internal big data analytics services, we are able to accurately predict problems and have better access to information that allows us to have a more proactive approach to managing our network. Several initiatives underpin this drive, which include the implementation of the digital technician concept, improving our dispatching methodology and ensuring quality productivity. The aim is to improve customer satisfaction and improve internal efficiencies by driving the first-time-right principle. We will continue to improve our fulfilling and assurance processes.

Opportunities are being identified to cross-sell IT and connectivity solutions in the new combined customer base.

The integrated business has the ability to deliver end-to-end digital solutions to its customers, with unmatched data centre capabilities and a strong network offering. Synergistic benefits of the integration are evident in key deals won recently, mostly in the public, retail, banking and financial services sectors. These deals would normally necessitate striking partnerships with various entities, given the scope of the needs of our customers.

The merger of Enterprise and BCX has increased the gross profit and EBITDA margin, as the Enterprise business historically operated at higher margins. EBITDA margins increased from 7 percent in FY2016 (BCX prior to the merger) to 15 percent in FY2017 (combined entity). The Enterprise business contributed approximately R5 billion in revenue to BCX.

BCX consolidated the basic cloud services and created a single platform to deliver cloud services that are syndicated from independent software vendors and hyperscale providers and consume our own from BCX data centres. We strengthened our data centre capabilities to include Oracle and launched Cisco-hosted collaboration solutions and SAP HANA Enterprise cloud services. The BCX platform provides cloud solutions that allow the provisioning and billing of infrastructure as a service, platform as a service, and software as a service. BCX believes that the simplicity of how customers can manage their own accounts using this platform allows for quicker adoption and improves our ability to up-sell and cross-sell.

Our Kompare app – a consumer product and price comparison app - was upgraded to allow customers to review and transact through the vendors e-commerce platform. Through new and continuously improving relationships with merchants and various businesses, we provide customers with access to product purchasing on a convenient platform. We successfully launched the Black Friday campaign using the Kompare platform to enable customers to complete end-to-end e-commerce transactions.

The chat-based market place web and mobile app called Yapp, was successfully launched in February 2017 for small medium entities (SMEs) customers. This will provide SMEs with an interactive market place that offers suppliers the ability to interact with their customers via online chat. It allows customers the opportunity to rate their suppliers performance.

The first year of launch focused on on-boarding service providers, customers and growing usage.

Businesses are demanding omnichannel capabilities from their suppliers when making workrelated purchases. We have commenced to roll-out engagement capabilities that enable SMEs to offer omni-channel services to their customers. This also assists SMEs align their service fulfillment and organisational processes with the desires of their customers for rich omni-channel experiences.

In order to offer the full scope of services, partnerships have been entered into with a number of over the top players. We will continue to form partnerships with other players to provide new solutions to the market. Customer satisfaction is key to us therefore increased focus was given to improve customer satisfaction.

The active subscriber base grew by 47.7 percent to 4 million with a blended average revenue per user (ARPU) stable at R89. Our post-paid subscribers increased 54.5 percent to 1.2 million with an ARPU of R181 supported by FreeMe. This popular product was well received, with Tariffic pronouncing FreeMe packages as the top choice for high data and voice users in South Africa. Of our post-paid subscribers, 13 percent use FreeMe, of which 79.0 percent are new customers. On the back of this successful product, we launched FreeMe Family in February 2017, which allows subscribers to share their data bundles with up to nine members of their families or in a small business. FreeMe Family strives to consolidate the mobile telecommunications spend for families, and is a single contract for families or small businesses with easy sharing options on voice and data.

Our mobile broadband-led strategy delivered a strong performance, with mobile data revenue increasing 49.6 percent to R2.4 billion supported by an increase of 44.6 percent in mobile broadband subscribers to 2.6 million. Following the re-farming of our 1 800 MHz spectrum to extend our LTE offering to smart phones, we observed good growth of 45.7 percent in our smart phone base to 1.9 million.

Our nomadic LTE offering continued to grow, driven mainly by our popular “Deals of the Month” smart broadband and uncapped offerings. Our LTE strategy will continue to offer higher bundles and greater customer value propositions.

The fixed-line business saw good growth in fibre subscribers, which was a combination of both migration from ADSL and new customers. Even though we are still experiencing churn in ADSL, this was offset by an increase in demand for higher speeds and more uncapped data. The integrated data services SIM allows the customer to use a percentage of the SoftCap data from a mobile device.

For the small business unit, we invested in creating capabilities and introducing solutions to improve overall customer experience. During the year, we launched various innovative products with customer needs in mind such as “Voice and Data Failover” and “Smart Virtual Office Solutions” (SVOS). The SVOS were developed to provide customers with back-up functionality to ensure that they are connected in case of any connectivity disruptions. SVOS were introduced to help businesses grow their footprint without set-up costs. The solutions enable the customer to have various virtual telephone numbers linked to different local area codes, to effectively market themselves anywhere, and gives peace of mind to customers who feel more comfortable with dealing with a company that has a local presence.

With our focus on customer experience improvements, we simplified our channel interactions with our call centres, stores and online. We implemented account management capabilities for selected customers. Telkom Direct Stores’ answering service functionality was established, resulting in 118 000 calls handled, leaving more time for agents to effectively handle sales in the stores and concentrate on customer experience. We improved our operational issues with the fulfilment of orders, and installation time between customers placing an order and service has been reduced.