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