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What is material in our value-creation process
Operating environment

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.

       

Key factors

   

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.

Related material theme
  • Economic climate

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:

  • Technology
    Technology continues to provide "more for less" to end-users and to the industries supplying them (e.g. fifth generation (5G), network function virtualisation and software-defined network).
  • Broader ecosystem
    Global internet players are able to disrupt the telecommunications industry and reduce its profits (e.g. OTT, device original equipment manufacturers, content players, etc).
  • Telecommunication competition
    Different technologies are converging and changing the competition including fixed and mobile, in-market consolidation, expansion in ICT services, content, and financial technology.
  • Cybersecurity
    There is an increasing demand for cybersecurity (including network and mobile device) and data protection/privacy.
   

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.

Related material theme
  • Evolving technology and ICT market trends

Competition

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.

Related material theme
  • Intense competitive landscape

Regulatory environment

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.

Related material theme
  • Regulatory environment