Free to com­pete

Ironic, but it’s the key to the fu­ture growth of both

Finweek English Edition - - Portfolio Punts -

THAT THE THEME OF South Africa’s long­time mo­nop­oly in­cum­bent fixed line op­er­a­tor Telkom’s re­cent in­terim re­sults pre­sen­ta­tion was “the free­dom to com­pete” is ironic. Few peo­ple would im­me­di­ately think of Telkom as hav­ing had too many shack­les in the past. How­ever, its free­dom – en­abled by its loom­ing di­vorce from Vo­da­com – is ac­tu­ally a key com­po­nent of Telkom’s fu­ture abil­ity to de­liver growth to share­hold­ers. Without Vo­da­com, Telkom can play in the mo­bile sec­tor both in SA and the rest of Africa.

The same ap­plies for Vo­da­com, a com­pany that in­vestors will soon be able to own shares in di­rectly af­ter it’s un­bun­dled and listed sep­a­rately on the JSE next year. Without Telkom, Vo­da­com can com­pete in Africa and plans to ex­pand its ser­vices.

Like a bad mar­riage, the part­ner­ship had ac­tu­ally started to be­come de­struc­tive. The only ben­e­fits, it seems, were fi­nan­cial. That can be ev­i­denced by Telkom’s lat­est set of half-year re­sults (see ta­ble).

Apart from its strat­egy of de­fend­ing and grow­ing ex­ist­ing rev­enues, Telkom has a num­ber of po­ten­tial growth ar­eas. It plans to use some of the pro­ceeds of the sale of 15% of its stake in Vo­da­com to Voda­fone – it pro­poses to re­tain 50% of the post-debt R22,5bn pro­ceeds – to se­lec­tively build its own mo­bile net­work. It will also sign an agree­ment with one mo­bile op­er­a­tor to roam on its net­work to be able to of­fer a com­plete mo­bile ser­vice.

In ad­di­tion, plus an ac­cel­er­ated next gen­er­a­tion net­work roll­out, Telkom is also back­ing 75% Nige­rian sub­sidiary Mul­tiLinks as a fu­ture growth source. The re­cent

Bat­tling to keep up with de­mand. Reuben Septem­ber Growth sat­u­rated? Pi­eter Uys

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