Turn­around strat­egy yields re­sults

Finweek English Edition - - MARKETPLACE -

In 2013, just after Sipho Maseko joined Telkom as CEO, he listed three ar­eas the com­pany needed to ad­dress: re­set­ting its cost base, cre­at­ing a new affin­ity with its cus­tomers and re­solv­ing the mo­bile is­sue in a way that en­ables it to be a tele­coms com­pany of the future. Two years later, Telkom de­clared its first div­i­dend since 2011. And re­leas­ing the group’s re­sults for the year to end March on 6 June, Telkom said it has com­pleted its three­year turn­around strat­egy and is now well-po­si­tioned for growth.

As part of its turn­around plans, it has cut its head­count from over 21 200 em­ploy­ees in 2013 to below 14 000 by the end of the 2016 fi­nan­cial year, while em­ployee ex­penses have been cut from R9.28bn to R7.91bn over the same pe­riod. It has also man­aged a sig­nif­i­cant turn­around in its mo­bile oper­a­tions, which re­ported an ebitda (earn­ings be­fore interest, tax­a­tion, de­pre­ci­a­tion and amor­ti­sa­tion) loss of R40m in the past fi­nan­cial year, down from an ebitda loss of R2.16bn in 2013. Telkom said the mo­bile busi­ness has been break­ing even on a monthly ba­sis since the fourth quar­ter of the 2016 fi­nan­cial year.

Its R2.6bn takeover of Busi­ness Con­nex­ion (BCX), which expanded Telkom’s en­ter­prise ICT ser­vice of­fer­ing, is also start­ing to bear fruit, con­tribut­ing new tech­nol­ogy rev­enues to the group, it said. BCX re­ported rev­enue growth of 17% for the seven months, with rev­enues in Europe, the Mid­dle East and the rest of Africa up 40%, it said.

Yet chal­lenges re­main. The num­ber of fixed lines in ser­vice has fallen to its low­est level in more than 20 years, and the group warned that it is see­ing an in­creased com­pe­ti­tion, par­tic­u­larly in the fi­bre space, putting its mar­gins un­der pres­sure. On the plus side, Telkom de­clared a div­i­dend of 270c a share, up 10.2% from the pre­vi­ous year’s to­tal div­i­dend. How to trade it:

Sipho Maseko CEO of Telkom

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