Telkom Mobile, originally launched as 8ta in 2010, has reaffirmed its commitment to investing in last-mile mobile network infrastructure, diverging from the path taken by rival Cell C.
Lunga Siyo, CEO of Telkom’s consumer business, emphasized Telkom Mobile’s steadfast position as a long-term player in the South African telecommunications market during an interview with TechCentral. He dismissed the notion that there isn’t enough room for a third infrastructure player, citing Telkom Mobile’s achievement of 20 million active SIM cards as evidence of the company’s robustness. Telkom Mobile ranks as the third largest mobile network in South Africa, trailing Vodacom and MTN but ahead of Cell C.
“International studies show that achieving a 15% market share significantly improves a company’s survival rate. At 20% market share, the business becomes sustainable,” Siyo stated. “We have moved beyond survival; we are now building a sustainable business with 20 million customers backing us.”
Siyo noted that Telkom Mobile currently holds a 19% market share based on active SIM cards and highlighted various metrics that underscore Telkom Mobile’s stability. Over the past five years, the company has consistently reported positive EBITDA (earnings before interest, tax, depreciation, and amortization), with a service revenue growth of 6.8% for the year ending March 31, 2024—more than double the market average of 3%.
“That growth indicates that customers appreciate our offerings. It also signifies brand relevance; if your brand lacks relevance or the right market propositions, customers will not return after their initial purchase,” Siyo explained.
He further highlighted that Telkom Mobile’s EBITDA margin peaked at over 30% during the COVID-19 pandemic, driven by increased demand for data from remote work. Current levels around 25% are deemed “appropriate” given Telkom Mobile’s strategic focus on data services rather than voice services, which generally offer higher margins.
Siyo projected that as voice revenues decline, EBITDA margins for Vodacom and MTN will also decrease. “The margins on traditional voice services are higher than those on data services. However, South African operators are fortunate compared to their counterparts in Europe and the US, where EBITDA margins hover around 15%.”
Regarding market consolidation, Siyo acknowledged Telkom’s previous attempts to acquire Cell C, though these talks did not yield results. He noted that while infrastructure-level consolidation is likely, it doesn’t necessarily imply acquisitions. Instead, network sharing will become more prevalent, provided it is properly regulated to maintain competitive balance.
Sharing infrastructure, such as towers, can significantly enhance network efficiency. Operators could share not only tower space but also the equipment installed on them, reducing costs and ultimately benefiting consumers through lower prices or added value. The telecommunications industry has already begun exploring infrastructure sharing, with exemptions granted by the communications regulator Icasa and the Competition Commission allowing operators to share backup power equipment to mitigate load shedding impacts.
Despite these advancements, regulators remain cautious, ensuring that infrastructure sharing does not lead to anti-competitive behaviour that could harm consumers.
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