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TelOne’s Revenue Increase Coming From The Right Place, They Now Need To Move In And Capture The Internet Value

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WiFi Home and Away, TelOne Zimbabwe, Telecoms Zimbabwe, WiFi

TelOne, Zimbabwe’s only fixed telecom operator has a huge debt problem which is like a serious target at the back of their heads. The company last turned a profit in 2015 and continues to see voice revenue decline as does essentially all telcos around the globe. Being that as it may, I am cautiously bullish about the parastatal.

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Revenue increase

The revenue increase as we reported earlier was only marginal from 2016 to 2017. They grew by 3% to $117 million. However, this is their first increase in revenue since 2014 so it’s a good thing that the arrow is pointing up again.

Source of growth is the key

Broadband revenue grew by 36% to $45 million from $33 million. Voice revenue declined by $7 million to $72 million. This means the source of growth in revenue was broadband. The contribution of broadband revenues to total revenues has grown from 29% in 2016 to 38% in 2017.

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This growth in contribution is important because employees will vividly see that their future is the internet and stop trying to revive voice as we see with some telcos.

The increase is not just because of an increased number of subscribers

One of the most important metrics to track in telecoms is the Average Revenue Per User (ARPU). This is an important number because telecoms is a capital intensive industry hence it is important to grow the amount of value you derive from each customer as well as increase the number of customers.

TelOne’s combined ARPU (voice and broadband combined) increased to $27 in 2017 from $25 in 2016 which itself was a deep from $32 in 2015.

What is more interesting is that the ARPU of broadband products itself has increased. On average TelOne got $379 from a broadband subscriber in the whole of 2016 and they increased this to $409 in 2017. The trend shows higher consumption of broadband by Zimbabweans which pattern the sector reports by POTRAZ already predict.

Now the real work has to start for TelOne

It’s now an obvious fact that telcos have to evolve from being mere dumb pipes that offer connectivity. The age of the internet is not going to be owned by mere connectivity enablers because the very services that the internet powers, exist to disrupt the carrier: anyone say WhatsApp?

Yes as more people start to use the internet and increase their individual usage of the internet, TelOne and other telcos will continue to grow their revenue and ARPU. However, the pressure to lower access fees will continue to increase both from the mere competitive nature of the ISP space and the government. Consumers themselves will continue to demand that data should fall. This will threaten the ARPU.

There is still much that telcos can achieve but they will need to think differently and to look beyond their massive infrastructure if they are going to make it. Increase in ARPU will have to come from providing internet services and not merely offering connectivity that allows the consumption of such services. TelOne has shown some hesitation which they need to discard for them to win in the internet business race.

Video on Demand

Last year TelOne almost launched a video on demand (VOD) service and for some reason they retreated. They were going to be first before Kwese ifli. Maybe the cancellation of the launch was because the Broadcasting Authority of Zimbabwe insists that VOD needs licensing as if YouTube paid for any license. TelOne now has the necessary license. This space is still open especially as far as local content goes. I encourage TelOne to go for it.

They already have almost 100 000 broadband subscribers and if we look at the POTRAZ report for 2017 we can conclude TelOne dominates the none mobile internet space as the chart below depicts:

The chart shows that TelOne has a head start when it comes to fixed internet for the home and for business. They also offer fibre and VSAT which they can keep increasing. The investment they need to make now is in their copper and associated infrastructure to make their ADSL more reliable and robust.

The point here though is that TelOne can offer a good product that bundles broadband and video on demand. I would say this is an area where investment could give a good return. TelOne already has data centres that can host video content within Zimbabwe and hence they can zero rate all local content for their customers. Hack, they can even get Google to mirror YouTube unto their data centes and offer YouTube for free! Maybe I’m just being naive…

VoIP

TelOne offers VoIP for business and homes. Making calls on the internet is one of the biggest disruptions that has hit telcos as a result of the internet. I would like to see TelOne become more innovative and aggressive in pushing this service. How? I don’t know but I don’t see much that the telco is doing right now.

The data centres

I was super excited to see TelOne launch their data centres last year. Now I am waiting to see them take full advantage of this investment. So far, it looks like they are targeting enterprise customers. I think this is a mistake, the customer to attract is the startup. Cloud computing is a revolutionary set up that was essentially introduced by Amazon through Amazon Web Services (AWS). The idea behind AWS was to give startups Infrastructure as a Service (IaaS) in a very simple, affordable and easily scalable way.

Who became those startups? Facebook, Netflix… As these businesses scaled to become the giants they are today they kept demanding more of the cloud resources. TelOne would do well to focus on startups. They may not make money now but they will. Imagine if Bustop TV were to be hosted by TelOne and made free to access on all those TelOne home connections…

Yes startups

Earlier this year I was happy to know that TelOne has an Innovations Manager whose job is to work with startups supporting them. I am glad they have made co-working spaces available to startups. An official at the telco recently told me that the spaces were becoming oversubscribed.

This is what they should do more of. They are going to need to acquire some of those startups. They are too big to change at the pace they need to in the internet economy. Also as disruption theory states, the new markets that are still emerging are still too small for TelOne to be excited about hence organizational inertia will not allow them to fully take advantage of them. They need to have smaller organisations that will pursue those small wins without the pressure of needing to make millions right now.

Can TelOne pull it off?

I think TelOne finds itself in a good place to do the above and more. As I said in the beginning, I am bullish about them. Why?

Impending privatisation

The government has announced plans to partially privatise TelOne. This may bring more market driven shareholders and fresh capital that the giant really needs.

Position in the home market

Right now, TelOne is ahead in the home internet market. They need to defend this position very deliberately. Everyone who has ever had a telephone in their home is a potential customer whether they owe an outstanding bill or not. This is not time for debt collection, this is time to connect people to the internet. They should even stop charging upfront for the modems. Getting that ADSL connection must be made as frictionless as possible.

Leadership

I think Chipo Mtasa has what it takes to make the business grow. The TelOne that she has created now is totally different from the TelOne that was there before her time. The culture itself has changed and I think now the culture is more conducive for the kind of innovation they need to pull off. She achieved the same when she was at Rainbow Tourism Group, I think she can do it again.

They may fail

They may fail because the government is the sole shareholder and the government is run by politicians and politicians come and go and are motivated by other stuff that’s not just profitability. At least there is talk of partial privatisation….

They may also fail because the internet is brutal. Internet economics demands no less than the most excellent customer experience and the most thought out value proposition. Telcos still have hang overs of a world where they made money just because they had a special paper that has ‘licence’ printed on it.

TelOne was an arrogant monopoly that put people on 20 year waiting lists just to get a telephone line. They need to cleanse themselves of that arrogance otherwise they are doomed.


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TelOnePOTRAZChipo Mtasa

TelOne is one of the several Telecoms companies operating in the Zimbabwean telecommunications and technology industry. Its main core business revolves around voice, data and internet products and services. "TelOne owns a wide range of telecommunications equipment, varying from various exchanges located in strategic areas,... Read More About TelOne

The Postal and Telecommunications Regulatory Authority of Zimbabwe POTRAZ) is the regulatory authority of Zimbabwe's telecommunications sector and was established in terms of the country's Postal and Telecommunications Act Chapter 12:05. POTRAZ was established in February 2001 Read More About POTRAZ

Chipo Mtasa is a Zimbabwean entrepreneur and the managing director of TelOne Read More About Chipo Mtasa


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