We monitor local and global trends to assess their potential impact on our markets and customers. We adapt our strategy to leverage the associated opportunities or mitigate the risks where needed.
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2023 was a difficult year for the global and South African economies. It started with two wars and major concerns over regional conflicts impacting global trade and logistics. Floods caused significant damage to parts of KwaZulu-Natal and the Western Cape. Elections are scheduled in countries representing 50% of the world's population, including South Africa. Against this backdrop, 2024 will present unparalleled challenges locally and globally.
For South Africa, some improvements are on the horizon. Higher economic growth is forecast compared to last year, and inflation and interest rates are expected to decline during 2024. Coupled with an expected reduction in loadshedding, this would bring much-needed relief to ordinary South Africans. The volatility of the rand – which depreciated by almost 8% in 2023, adding to cost pressures on imported goods – may also be on the turn, given the latest market forecast for 2024. The outlook for 2024 is positive overall, despite great uncertainty, and could provide opportunities for accelerated growth in some sectors of the South African economy.
Most of our business units grew in FY2024. However, we are closely monitoring the impact of top-line revenue pressures driven by rising inflation and higher operational costs due to ongoing loadshedding. In line with our operational efficiency strategic pillar, we are maintaining our focus on sustainable cost management and targeted capital investments. This aims to mitigate the downside risk of lower economic growth and adverse weather-related events. Telkom's risks associated with climate change are integrated into our ESG strategy and our risk identification, management and assurance processes.
Further reading
Managing risks and
compliance
Managing risks and
compliance
The South African enterprise ICT environment is dominated by a "cloud-first" approach. This sees many organisations shifting workloads to public, private and multi-cloud environments to enable more efficient retooling and improved business continuity. The resultant rise in cloud-computing locally has attracted global hyperscalers who are well equipped to offer these scalable and flexible IT solutions.
Increased competition from global players has sparked a talent war for critical skills in cloud, cybersecurity and AI operations. Associated with the increase in cloud usage is a greater focus on cybersecurity. According to a recent CSIR report, South Africa is eighth on the list* of countries that have experienced the greatest number of ransomware attacks, despite having only the 32nd largest GDP in the world.
This cloud-first environment is dependent on high‑speed fibre data links between data centres, ISPs, mobile service providers and enterprises. Consumers also need access to high-bandwidth connectivity services (mobile, fixed wireless and fibre) to use these cloud services. Enterprises are rapidly phasing out their legacy connectivity solutions and replacing them with lower‑cost next-generation technologies such as software-defined wide area network (SD‑WAN) and cloud voice.
* Infosecurity Magazine, 19 January 2024.
With year-on-year mobile data growth of 20% and a network that carries over 120 PB per month, Telkom is realising its goal of deploying a data-led mobile network as we lead in broadband through our technology innovation strategic pillar. While we continue to depend on the 4G and 4.5G technologies that powered this growth, we decommissioned 2G in 2023, well ahead of the government's requirement to sunset legacy technologies by December 2027. The next phase will be to decommission 3G and expand 5G services as the technology matures.
Openserve continually invests in its optical transport network to carry national traffic across all provinces, enabling the increased data growth seen in South Africa. The network now caters for speeds up to 10 Gbps. This allows Openserve to utilise its network optimally to provide connectivity services to mobile, enterprise and consumer segments.
BCX has partnered with Alibaba to be its exclusive reseller in South Africa and preferred partner for the rest of Africa. The partnership will enable us to leverage the industry solutions that delivered significant client value for Alibaba in the Asian market. This will help BCX become a leading XaaS provider, in line with our integrated solutions and partnerships strategic pillars.
Further reading
Unpacking our
PIVOT Strategy
The South African ICT sector remains highly competitive, with an increasing focus on customer experience. There is a steady demand for communications, particularly data services, as customers seek cost-effective solutions to stay connected despite the macro-economic challenges. These include increased loadshedding, inflationary pressures, higher interest rates and reduced business confidence, all of which continue to put consumers and businesses under significant financial pressure.
Loadshedding makes it challenging for mobile operators to maintain a quality and reliable network experience for customers. They must incur additional costs to maintain access, leading to pricing adjustments for customers.
In the digital economy, more South Africans rely on fixed and mobile data for personal and business use, driving an ever-increasing growth in both the adoption and consumption of data. The competition to serve these customers is intense, particularly within the pre-paid markets.
Telkom is committed to broadband and data leadership as per our strategy. We have invested in additional spectrum, alternative power sources, new network expansion and capacity upgrades. These are all geared to providing a quality network experience, in line with our technology innovation strategic pillar.
Telkom's fixed and mobile data value propositions cater for all business and consumer segments. We are committed to delivering innovative and value‑based product propositions, providing customers with maximum value at affordable prices. These value-rich propositions have led to increased data consumption and revenues. In particular, they have stimulated material growth within the mobile pre-paid business, driven through our private pricing platform Mo'Nice, the pre-paid product portfolio, and emergency top-up services.
Telkom's commitment to fibre connectivity has driven growth in fibre connections and associated revenues. Our summer campaign messaging, “Join the best value network”, backed up by independent research conducted by Tarifica in 2023, supports our strategic intent of being the leading value data network.
Further reading
Managing risks and
compliance
Unpacking our
PIVOT Strategy
Mobile operators were initially unable to make full use of the sub 1 GHz spectrum purchased at the ICASA spectrum auction in March 2022. This was due to residual interference from broadcasting systems in parts of South Africa. Following the final switch-off of analogue television on 31 July 2023, the sub 1 GHz spectrum became available nationally for mobile services.
ICASA's next spectrum licensing process or auction was due to be concluded by March 2024, but this has not materialised. It is now expected to be concluded during FY2025. ICASA has indicated that it will first consider spectrum holdings post‑auction, imbalances in sub 1 GHz, and the impact of the previous auction on competition. It also indicated that it would conduct an inquiry into the existence of a secondary spectrum market to ascertain whether there is a need for regulatory intervention.
ICASA finalised its cost study to determine appropriate fixed and mobile termination rates. The final rates are expected to be implemented in FY2025. Telkom welcomes ICASA's commitment to implementing a lower-cost standard. We trust that the new glide path will stimulate the South African economy through fair competition and a reduction in the cost of communication.
After the final broadcasting interference was cleared, Telkom was able to deploy 800 MHz across the various regions of South Africa. Therefore, we paid the final auction fee on 29 December 2023. The low band spectrum enables us to improve indoor coverage and increase the distances between base station sites. This leads to improved customer experience and contributes to the operational efficiency strategic pillar.
Telkom supports the principles of enhancing service quality, customer choice and effective competition. Through constructive engagement with regulators and policymakers, we aim to ensure that the electronic communications sector is competitive and able to support South Africa's economic growth and the empowerment of its people.
Further reading
Managing risks and
compliance
Driven by international initiatives to combat climate change, South African companies are under pressure to reduce their carbon footprint and strive for net zero emissions. While Africa contributes minimally to greenhouse gas emissions, it is experiencing significant impacts from human-induced climate change, including biodiversity loss, water scarcity, and economic setbacks. Limiting global warming to 1.5°C is crucial for mitigating these impacts, particularly in African economies.
Many South African companies have implemented sustainability measures, including science-based emissions targets and increased renewable energy utilisation.
In FY2022, Telkom developed an ESG strategy with a focus on becoming carbon neutral by 2035 and net zero by 2040. Our ongoing efforts include exploring alternative energy sources and reducing Scope 1 and 2 emissions, enhancing our competitiveness in the market.
Our Scope 1 and 2 emissions have decreased by 9%. This was primarily due to ongoing diesel optimisation projects (lithium-ion battery installations) and ongoing accounts terminations and re-billings as we continued efforts to increase renewable energy use. We are committed to refining our approach across governance, strategy, management, metrics and performance, in line with market and stakeholder expectations.
Further reading
Natural
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Natural
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