Turnaround strategy yields results
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