Telcos bleeding money

Load-shedding has hit telcos hard, and even though Eskom has had a more stable electricity supply recently, the industry now has to battle load-reduction. 

This was explained by the Association for Comms & Technology (ACT) CEO Nomvuyiso Batyi on the TechCentral Show.

The ACT is a telecommunications industry lobby group that represents South Africa’s big telecommunications operators. It warned that the suspension of load-shedding at the national level does not reflect the reality on the ground.

Batyi explained that although the situation is not as bad as it has been at the height of load-shedding, operators are still diverting millions of rand into keeping network infrastructure powered through periods of load-reduction.

“The municipal infrastructure has really diminished. There are pockets where load-reduction is happening and others where the infrastructure, due to the load-shedding that happened before, just trips for no reason at all,” Batyi said.

There has been an uninterrupted power supply since 26 March, which marks over four months of suspended load-shedding.

Eskom also recently announced that they reached 35,000MW of available capacity for the first time in six years.

“Whilst it looks good at a national level, there are pockets wherein load-reduction is happening,” Batyi said. 

Load-reduction is particularly prevalent in colder Winter months when the demand for electricity is at its highest. 

Load-shedding occurs when the national grid can’t generate enough electricity to meet demand.

Load-reduction, on the other hand, is used by Eskom in specific areas to protect transformers from overloading when there’s enough electricity available.

In a recent statement, Eskom said its winter outlook is still in full force despite the improved performance and Kusile Unit 5 coming online.

This outlook predicted the utility would keep load-shedding to an average of stage 2 during the colder months.

It also said that managing the morning and evening peaks has become increasingly difficult for the utility, which threatens to push Eskom to reintroduce rotational power cuts.

So far, the utility has managed to avoid this but has had to reintroduce load-reduction, which reduces electricity supply to areas of elevated demand to ensure its infrastructure is not overloaded.

It emphasised that load-reduction is not load-shedding, as it still had sufficient generating capacity to meet the country’s electricity demand.

About 94% of the total overloaded transformers are a result of electricity theft and indiscriminate use of electricity, according to Eskom. 

Batyi said that load-reduction is the result of underinvestment in municipal electricity infrastructure.

She explained that not a single one of ACT’s members – Cell C, Vodacom, Telkom, MTN, Rain, and Liquid Intelligent Technologies – has been unaffected by load-shedding. 

These companies were forced to use funds they would have otherwise spent to roll out 5g solutions on load-shedding solutions. 

Independent Communications Authority of South Africa (ICASA) State Of The ICT Sector Report revealed that in 2023, service providers spent R2.5 billion on batteries during load-shedding. 

Another R930 million was spent on generators during the same period. 

“About 3,268 generators and 150,415 batteries were purchased to counteract the effects of load-shedding by service providers in 2023,” ICASA added. 

“When you look at the financial results of our members, you can see how damaging load-shedding has been to the sector,” Batyi said.

The telecoms industry in South Africa has been facing other headwinds in recent years, too. 

Some of the country’s biggest operators have been hit with falling share prices, international issues, and an ongoing skills war.  

Vodacom’s share price declined by 9% in the first six months of the year as investors were concerned about the company’s challenges. 

This includes the devaluation of the Egyptian currency, Vodacom’s second-biggest market after South Africa, and the Supreme Court of Appeal (SCA) judgment which entitled Please Call Me’s Kenneth Nkosana Makate to R29 billion.

MTN has had a similarly difficult time. Its share price plummeted by 26% due to the monetary collapse in Nigeria, MTN’s biggest market. 

Other major operators, including Cell C and Telkom, have also been feeling the heat. 

Cell C’s financial performance has been on a downward trend for years, with the company reporting a loss of R337 million for the six months ending November 2023.

Sanelisiwe Tofile from All Weather Capital said there is a lack of strategic direction at Telkom.

“Telkom faces a lot of price pressure in South Africa, and there is a big regulatory burden on telecoms operators,” he said.

On top of this, the industry is faced with a skills war, as demand for highly skilled professionals continues to outpace the available talent pool.