What is material in our value-creation process
Global and local ICT markets impact and shape our operating environment in unique ways. Our external environment presents risks and opportunities, and our strategy accounts for potential changes in these environments and the consequent impact on our business.
Telkom assesses the external market and changes in the external environment continuously while updating our strategies where necessary.
Implications for our strategy
Economic and political environment
We have had a challenging environment during the past 12 months resulting in wavering GDP growth, low business confidence and volatile local and global politics.
Despite a weaker than expected quarter one GDP result this year, the prognosis for GDP growth in 2018 is still relatively positive, with economic consensus looking for an improvement on 2017 GDP. We are however, aware of the risks to GDP growth which are; an elevated oil price, tighter global liquidity conditions and the global trade turmoil that has already yielded in the depreciation of the rand. Despite the inflationary characteristics of these risks, we believe that the interest rate outlook for 2018 will remain stable.
Economic and policy uncertainty directly impact our customers and their spend on ICT. The group continues driving down the cost to communicate and providing customers with cost-efficient solutions.
The group will continue with its internal cost optimisation programmes to ensure financial sustainability.
ICT sector and technology
The South African ICT market will continue expanding and having a material impact on the general economy, with the biggest growth expected to be in the broadband/data segment. Technology will continue to unlock value in the economy as it optimises processes and transforms industries. This is called the Fourth Industrial Revolution and includes, but is not limited to, artificial intelligence, automation, big data analytics, cloud storage and computing, the Internet of Things (IoT), and blockchain technology.
In terms of specific ICT trends, various global and local factors are changing the future of ICT:
Telkom is well positioned to take advantage of the Fourth Industrial Revolution and the convergence of telecommunications, technology and media. Nevertheless, the group needs the right talent and must reskill employees where necessary to leverage the digital revolution.
We are looking beyond traditional connectivity streams and investing in fast-growing services such as big data analytics and cybersecurity.
ICT is becoming more competitive with the rise of niche players and increased relevance of OTTs. Some segments are price sensitive and have low customer loyalty. Voice is eroding, and there is downward pressure on traditional connectivity revenues.
While many of the traditional fixed players are looking to use wireless technologies, we also see the traditional mobile and wireless players going into fixed-line or fibre market segments.
Our mobile business will continue disrupting the market with data-led products and value enhancements. Our fixed-line business will expand uncapped data and unlimited voice product propositions to generate annuity revenue and offset voice revenue decline.
The regulatory environment in South Africa is rapidly changing following legislative changes such as the Electronic Communications Act Amendment Bill and the Competition Amendment Bill, as well as regulatory inquiries on the market structure in terms of communication services and their prices.
The Electronic Communications Act Amendment Bill proposes legislation around the creation of the wireless open access network, wholesale open-access, rapid deployment of infrastructure, terms and conditions for licensees, universal service obligations and assigning spectrum.
Telkom continuously engages government and the various regulatory bodies constructively and responsibly.
The group reviews its compliance with regulations and ensures that our operating model considers their requirements.