National telecommunications group Telkom has entered the financial services industry as it looks to compete in e-commerce and diversify its revenue streams.
Telkom Financial Services will compete against the likes of mobile phone rivals MTN, Vodacom and other fintech players.
Launched on Sunday, Telkom Financial Services, which includes a life insurance business, will initially sell funeral insurance to the telco's more than 12-million customers.
As mobile operators in Africa increase their investments in fintech services, mainly focusing on mobile payments, Telkom too must find new revenue streams to offset the continued decline in its legacy copper-line business. It is, however, entering an increasingly crowded market dominated by established insurance giants such as Old Mutual, Liberty and Sanlam.
Telkom holds more than 10% of SA’s mobile market and since March 31 the company recorded 23.9% growth in active mobile subscribers, giving it one of the most important distribution channels for insurance products in SA.
“In recent years. Telkom has made a strategic shift to digital distribution, which puts it in an ideal position to distribute insurance products using its considerable digital structure and intellectual property,” said Sibusiso Ngwenya, managing executive for Telkom Financial Services.
He said Telkom’s goal in building an insurance business of scale was to be able to use its size to negotiate the best deal for its customers.
‘Strong brand affinity’
“Telkom customers already have a strong affinity to our brand — they trust us. Being able to launch our funeral insurance product to our existing customer base gives us the ideal platform to get the business off the ground by offering our customers customised life insurance products, starting with the Telkom Funeral Plan,” said Ngwenya.
The news comes hot on the heels of Telkom announcing it would rebrand and repurpose the almost 70-year-old Yellow Pages into an online marketplace called Yep!, as part of an effort to capitalise on the growth of e-commerce and grow new revenue streams.
Telkom spent R210.6m in August 2019 to buy out the minority shareholders’ 35.1% stake in Yellow Pages and now holds 100% of the company. The group spent R18m in capital expenditure to grow the unit in the 12 months to end-March 2020.
Yep! Online Marketplace will allow businesses that have normally listed their services, offerings and contact details to sell their wares directly to the public, allowing for buying, selling and bidding between businesses and to consumers.
Ngwenya said the insurance business would be offered with the help of Guardrisk Life.
The funeral insurance Telkom plans to sell will be written out of a Guardrisk Life cell captive. A cell captive gives the cell owner the ability to participate in the underwriting risk of the insurance business in the cell, similarly to if it was a licensed insurer in its own right.
“This strategic partnership between Guardrisk Life and Telkom creates an exciting platform through which to provide Telkom customers with affordable, innovative insurance products,” said Francois Schaap, managing executive of Guardrisk Life.
“We’re excited to partner with Telkom, one of SA’s best-known brands, not only to offer them the opportunity to sell insurance to their customers but also to let them shape employee benefits that suit their employees’ specific needs,” he said.
Telkom would offer five different cover levels starting from R10,000-R70,000, with the following product variations, main member only, main member and spouse only, main member and children only, family funeral cover and extended family member.
“We see an opportunity to leverage our core capabilities and our 12-million subscriber base,” Ngwenya said.
With Mudiwa Gavaza
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