Telkom turn­around starts to take shape

Finweek English Edition - - IN­SIDE - BY GUGU LOURIE

Un­der the lead­er­ship of Sipho Ma s e k o Te lk o m ’ s t ur naround st r ateg y is f i nally show­ing pos­i­tive signs as the f i xed-line com­pany cuts costs and en­ters into part­ner­ships to out­source the things it does not want to man­age it­self, leav­ing it to fo­cus on its cus­tomers.

Ea rl i e r th i s mont h Te lk o m an­nounced new part­ners to man­age its non-core ac­tiv­i­ties that in­clude call cen­tre op­er­a­tions and staff, as well as cer­tain legacy IT billing sys­tems, an in­ter­nal print­ing divi­sion as well as the net­work and op­er­a­tions, and re­tail sup­ply chain units.

Ma­jor­ity-owned by govern­ment and val­ued at more than R38bn, Telkom has i dent if i e d ASAJE, Bid­vest, Bar­loworld Lo­gis­tics, In­gram Mi­cro and WNS to man­age its non- core ac­tiv­i­ties as part of a turn­around plan ini­tially an­nounced in mid-Fe­bru­ary. It is tar­get­ing R1bn in an­nual cost sav­ings for the next f ive years.

Telkom is not cur­rently giv­ing out more de­tails about the out­sourc­ing process be­cause the mat­ter is still be­ing dis­cussed with rel­e­vant trade unions.

Com­pany s pokesper­son Jac­qui O’Sul­li­van s ays out­sourc­ing was a crit ica l step for Telkom, which in­tends to fo­cus more on sat­is­fy­ing its cus­tomers. “To suc­ceed, ev­ery­one at Telkom has to put the in­ter­ests of the cus­tomer at the heart of ev­ery­thing we do. Our cus­tomers are the core of our busi­ness, but run­ning call cen­tres is not,” ex­plains O’Sul­li­van.

“We know t hat cus­tomers will ben­e­fit from a fo­cused and con­sis­tent ser­vice that a pro­fes­sional call cen­tre or­gan­i­sa­tion can of­fer. For this rea­son, we are conf ident this is the cor­rect ac­tion to take.” JM Busha As­set Man­agers’ head of equities and port­fo­lio man­ager Farai Mapfinya says out­sourc­ing will have a pos­i­tive ef­fect on Telkom’s turn­around ini­tia­tives. “We think there are non­core act iv i t i es which have t a ken man­age­ment’s fo­cus at the ex­pense of core tele­coms and tele­phony ac­tiv­i­ties,” s ay s Mapf i nya. “We t hink s uch op­er­a­tions would be bet­ter man­aged in the hands of spe­cial­ist play­ers solely fo­cused on such busi­ness ac­tiv­i­ties.”

Telkom’s change of for­tunes and Maseko’s cost-led strate­gic re­boot have so far got the thumbs up from the state and in­vestors.

Mapfinya says the out­sourc­ing of non-core as­sets would as­sist Telkom to reach the R1bn an­nual cost sav­ings goal but not in its en­tirety. “A lot more will still need to be done to achieve the tar­get,” he warns.

“The turn­around, in our view, has yielded pos­i­tive out­comes al­ready and is al­most in its fi­nal stages. We think the easy, low hang­ing fruit of f ix­ing what was bro­ken will be be­hind us soon and the big chal­lenge fac­ing the busi­ness will be grow­ing the busi­ness off the new base set by cur­rent turn­around ini­tia­tives.”

Just how much wig­gle room Telkom has left to cut costs re­mains to be seen.

Mapfinya says f i xed-l ine voice is in a long-term sec­u­lar de­cline, while mo­bile voice has also re­cently suf­fered from the surge in data.

“The key for us will be iden­ti­fy­ing a nd pur­su­ing al t er na­tive i ncome streams from the tra­di­tional voice and tele­phony ser­vices that the busi­ness cur­rently of­fers,” says Mapfinya.

“We think f ixed-line data still has an edge over mo­bile data in terms of trans­mis­sion speeds and ca­pac­ity and is an area Telkom could ex­ploit.”

If th­ese pos­i­tive re­sults con­tinue, Telkom may be able to rei nstate div­i­dend pay­ments at the end of the 2015 f inan­cial year – a sit­u­a­tion that will make in­vestors happy. The last div­i­dend pay­out was in 2011.


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