Telkom Mobile made a profit for the first time in six years. We speak to the man of the moment
Telkom has been through hell as it has tried to modernise its business. But this week, its mobile operations made a profit for the first time in more than half a decade. The man credited for this turnaround is CEO Sipho Maseko.
The telecommunications company has been shedding jobs due to poor decisions, consistent declines in its fixed-line business, slow responses to rapid changes in the communications sector and a late entry into the mobile space.
However, this week Maseko announced the positive news, saying Telkom’s mobile division had turned an operating profit. Also, it had made a significant profit at its overall business.
Maseko, a lawyer by training, joined Telkom as its boss in April 2013, bringing his experience from Vodacom, where he was CEO and managing director. When he arrived at Telkom, the company’s mobile division had just sustained an operating loss of R2.2 billion in the year ended September 2012. This week, that unit delivered an operating profit of R214 million.
In an interview with City Press on Friday, Maseko attributed the profitability of the division to the “heroic efforts” of the leadership and the hundreds of people who work for Telkom Mobile.
“We have opened new channels, launched new products and we are leveraging data,” he said.
Telkom had not only been a price leader in the telecommunications space, but it “offered a lot more value” when it came to the design of its packages, he said.
“[The demand growth for voice phone calls] is near the end of its lifespan and we have responded to increasing customer needs for data in our product design. We have aligned our products to growing customer requirements,” Maseko said.
The world of telecommunications is changing, Maseko explained, and this change was bigger than Telkom’s mobile unit. There was increasing spend on broadband and fibre products, and customers weren’t bothered about whether broadband was delivered via mobile or fibre.
As a result, Maseko and his team reckoned they should drive the convergence of services in an integrated bundle. This is part of the reason for the R2.6 billion acquisition of IT company Business Connexion Group in August last year and it will assist Telkom to be more competitive and open up new opportunities in the business space.
On whether his time at Telkom has been stressful, Maseko said it had presented him with some of the “most fascinating” moments of his career. “No two days are the same,” he said. Telkom’s shareholders – including government with a 39% stake – have benefited from Maseko’s moves to turn the company around. When Maseko joined the company, Telkom’s share price was languishing at about R15 a share. This week, it was quoted at R66.40 – a massive 343% improvement, which values the company at R35 billion.
But Maseko’s turnaround plan to reduce costs at the company came at a price. Almost 7 500 people lost their jobs when the
SIPHO MASEKO by Justin Brown
company instituted retrenchments. Maseko said he was “eternally grateful” to the people who had taken voluntary packages. The job cuts had not been the only means that he used to reduce costs – other savings came from procurement savings and renegotiating contracts, he said.
“We did lose many people, but it is a fact of life that technology is changing,” he said.
He added that, in the process, Telkom enabled many of those who took packages to start businesses that the company had utilised. In some instances, Telkom provided them with capital support.
Maseko said that, at the end of September, Telkom had 3.2 million customers, which included corporations that signed up for the company’s products because they “like the pricing and product design”. It also attracted customers who favoured “postpaid and prepaid packages”, as well as clients who used a large amount of data for social-media platforms and video viewing.
Maseko said the company would continue to play “an insurgency role in the market”, even though it was not one of the dominant players in the mobile market.
“You can’t box pound for pound against a guy who is bigger than you. You’ve got to box, weave and retreat – that’s insurgency,” he said.
To boost Telkom’s market share, Maseko has been leading the price war in the local mobile sector together with Cell C. Consumers should thank Maseko and Cell C for much more competitively priced telecommunications offerings and packages, and for helping to break the Vodacom and MTN oligopoly.
CELLING POINT Telkom CEO Sipho Maseko is credited with the turnaround strategy for the parastatal’s mobile operations