Telkom ‘to be even better in 18 months’
TELKOM chairman Jabu Mabuza has promised shareholders that the majority state-owned listed company will be an even more evolved business in 18 months.
Speaking at Telkom’s AGM on Wednesday, Mabuza said a three-year restructuring was nearing completion. Telkom was ready to enter a transformation and growth phase, to change it from a limping, cashdraining enterprise into an agile telecommunications giant.
“We do believe the process will see a different Telkom in the next 18 months or so,” Mabuza said.
Telkom CEO Sipho Maseko said growth would focus on “how we lead in technology”. This would include a short pilot project to test super-speed 5G technology. He did not provide a time frame. The technology allows networks to handle functions such as ultra-high-definition displays and enhanced video conferencing. Some countries plan to lease radio frequency spectrum for 5G.
South African cellphone companies are still waiting for policymakers to release spectrum for 4G technology. “So it’s a big technological leap,” Maseko said.
A large investment in cloud computing is also due to be announced.
When Maseko, a former BP South Africa CEO and Vodacom executive, was appointed three years ago, there was not much good news to report on Telkom. Fixed-line revenue was dwindling, its two-year-old mobile start-up reported a loss of R1.7billion, operating revenue was declining and operational expenses were high.
Maseko sought to trim costs by R5-billion in three years and cut staff through early retirement, voluntary severance packages, and by outsourcing operations such as call centres. In the 12 months to March 2016, staff numbers have dropped to 13 766 from 18 333. Operating revenue and earnings now reflect double-digit growth. Losses from the mobile businesses were pared to R43-million by March this year.
Whereas the business was once described as rudderless by analysts, Telkom’s operations are now neatly restructured into a wholesale broadband business, Openserve, and a mobile business to focus on consumers. Telkom Business has merged with Business Connexion, which Telkom acquired last year.
But the company plans to refine its structure further. “We’ll also be revealing at some point an operating model that will be taking us forward,” Maseko said.
The share price has leapt more than 300%, from R14.88 in 2013 when Maseko took over to R61.50 this week. From March 2013 to date, Telkom’s share has delivered an annualised return of 58.47%. The JSE All Share’s return over the period is 12.12%.
Maseko said now that Telkom had a strong balance sheet it was considering acquisitions. “We have quite a few on the table, broadly on the information technology side, on the digital side and other sectors that will fascinate the market . . . We’re not going to be reckless about it.”
Telkom’s board was pleased with Maseko and the executive team had been refreshed with more black women, Mabuza said. One of them is Tsholofelo Molefe, the former Eskom financial director who has joined Telkom as deputy chief financial officer.
But while Maseko is striking the right notes with shareholders, he is battling to resolve a month-long strike by the Communication Workers’ Union over pay hikes, maternity leave, wage gaps, retrenchments and outsourcing.
Telkom rejects a union demand for an 11% increase. Maseko said Telkom linked reward to performance and poor performance “is something that we cannot encourage”.
Africa Analysis MD Dobek Pater said external challenges for Telkom included regulatory delays in the release of spectrum and an increasingly competitive environment in some areas such as the roll-out of fibre-optic cable to households.