OBG talks to Sipho Maseko, CEO, Telkom

Interview: Sipho Maseko

What impact can increased data usage have on average revenue per user (ARPU) growth?

SIPHO MASEKO: I believe ARPU will increase; however, the driver will not be connectivity alone, but rather the additional provision of value-added services. As people drive up their data usage, ARPU will also rise. Furthermore, I believe e-commerce will serve to boost ARPU as well, particularly given the convergence between the retail, telecommunications and financial services sectors. Lastly, the profitability generated by prepaid services will continue to positively affect ARPU growth, as said services are cash-based.

How can local loop unbundling (LLU) best be implemented to reduce communication costs?

MASEKO: The cost of communication can be lowered through infrastructure sharing. This leads to the optimised use of capital, as opposed to the astonishingly inefficient use that we currently observe in the sector. With margins narrowing, market forces are nudging operators towards collaborative efforts. Access is currently given to Telkom’s networks, and we continue to explore enhanced methods of providing the right services and solutions to customers. Some forms of LLU may fall within the solution space.

What steps must be taken to ensure the successful roll-out of universal broadband access?

MASEKO: The government and the private sector both have important roles to play. I believe government must consider three things. First, they must decide on an appropriate technology mix for broadband to reach everyone, particularly in the rural areas. Secondly, they must determine a minimum broadband speed. Lastly, the government itself must get online.

The proper technology mix depends on existing infrastructure. South Africa has about 180,000 cable km of fibre, the majority of which Telkom owns. As there is enough cable, underground and submarine fibre, and landing stations to ensure bandwidth, the issue is access. Unfortunately, the fibre-to-the-home option is prohibitively expensive. In order to reach rural areas the most appropriate mix is fibre, then wireless and finally satellite. By employing a technology called vectoring we can maximise the use of any existing quality copper to complete connectivity with fibre in certain areas, which would significantly boost speeds.

While we may use a mixture of fibre and copper in the townships, the deep rural areas will require much more wireless and satellite. However, the downside is that broadband speeds will be slightly lower outside urban centres, which brings us to the second point: we must ensure basic connectivity at a minimum speed for all users. Once this threshold has been decided upon, everything else can be done incrementally. The third step is getting the government online as quickly as possible, allowing them to increase effectiveness and enhance their service delivery capacity.

As for the private sector, it can use the backbone of infrastructure already in place to help connect the last mile by stimulating demand at that level. The infusion of private capital can foster further demand by bundling connectivity with other services as well.

To what extent is growth in mobile broadband penetration outpacing fixed-line broadband services?

MASEKO: While I believe the use of mobile broadband will continue to grow, demand for bandwidth will ensure the need for fixed-line services going forward. One of the trends we are seeing in Africa is leapfrogging, where we skip the analogue era and go straight to digital and now mobile. Even though penetration of mobile broadband is growing, it will play a largely introductory role to fixed broadband. Corporate big data needs will require the wider bandwidth provided by fixed lines.

From a data standpoint, fibre has a greater bandwidth carrying capacity than wireless. As internet penetration expands, content consumption habits will shift to more pull than push, thus requiring greater bandwidth. The key will be improving fixed speeds going forward.