8ta to lose R2.2bn

November 22, 2011 11:55 am 0 comments

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Telkom expects its mobile arm,  8ta, to  lose  approximately R2.2 billion for  the  2012 financial  year after  eliminations. 

The mobile arm was introduced in October last year and currently has a market share of  nearly 2%. Despite the expected losses, Telkom expects 8ta’s operation to achieve 12% - 15% revenue market share by  the 2016/17 financial year.

In its most recent financial statements, Telkom says 8ta has delivered a below target performance on its pre-paid offerings.  Commenting on 8ta’s challenges, group CEO Nombulelo Moholi said  it was always going to be difficult to compete. 

“Being the fourth entrant in a mature market that has two dominant players is proving to be every bit as challenging as market commentators predicted. Our challenge will be to reduce the drain on the group EBITDA over the next few years but failure is not an option. Management’s number one priority is to differentiate our mobile offering to enterprise and consumer customers. This differentiation lies primarily in leveraging our strong position in the fixed line arena,” said  Moholi.

8ta has experienced challenges in its first year of operation and Telkom says they will be addressed. One of these, was the difficulty to communicate 8.ta innovation and value, the company says.

It adds that lengthy negotiations on distribution channels had impacted it and the complex IT projects leading to delays in product launch. Limited HR resources and training of call centre staff, TDS and distribution channel agents was also problematic for the operator.

“Our main concern is the slower than planned pre-paid revenue growth. This is the direct result of our inability to optimise conventional distribution channels. We are working jointly with our distribution partners to complete systems integration and are designing innovative commission structures to grow our footprint,“ Moholi said.

The company says it plans to improve its distribution and innovation negotiations, ramp up marketing and improve communication. 

Telkom also plans to pursue “aggressive” network rollout as it plans to leverage fixed customer base and integrate sales force with consumer enterprises.

The operator, however, says it’s celebrating some of the successes that its mobile arm achieved. Of note was 8ta’s introduction of its market disruptive data offering that brought broadband prices down dramatically. Telkom says 8ta has over a million RICA’d subscribers and has enjoyed a strong performance on post paid customers. Eugene Morokolo

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