Business unusual at Telkom

2014-07-06 06:00

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Now that Telkom has returned into the black, its executive team faces the daunting task of maintaining and improving its position.

CEO Sipho Maseko and three members of his executive team have hinted that there are new deals in the pipeline, but have also spoken about doing the best with what they have – a change from previous management teams, which tried to reinvent the wheel to fight competition from the growth in mobile.

Maseko’s predecessor, Nombulelo Moholi, left soon after government, Telkom’s major shareholder, threw out a proposed bid by Korean-based KT Corp to buy Telkom.

Maseko said his team took a different approach to strategic partnerships, like the ones on the table with MTN and Business Connexion.

Telkom, which recently announced a profit of R3.9 billion, from a loss the previous year of R11.6 billion, recently concluded what is in essence a superroaming agreement with mobile operator MTN, where MTN will manage Telkom’s radio access network (RAN).

Acting CFO Deon Fredericks said this would allow MTN and Telkom to roam on each other’s networks. Telkom is also in talks to buy IT company Business Connexion, although talks have been suspended because of the recent death of its CEO Benjamin Mophatlane.

What makes Maseko nervous, though, is Telkom’s lack of scale in many areas. “For instance, when I buy handsets, we don’t have the scale that Vodafone has and Vodacom leverages off, and MTN has good scale and at some point we will need to resolve our scale issue. But what is clear, we have to win here in the home front because if you don’t win at home you’re going to struggle anywhere else,” he said.

Miriam Altman, the head of strategy, said when she joined Telkom in May last year, there was a psychology that fixed-line services were dead, “but actually fixed is the future, but you still have the challenge of how to monetise that”.

She said fixed-line is the undercarriage that connects you to the cloud and all the mobile operators are moving into fixed-line as part of their last mile – the final leg of the telecommunications networks, which reaches the customer.

Altman said technology plays a huge role in the National Development Plan, in which she played a role as part of the National Planning Commission.

“We argue in the plan that if you want to get the cost of living down and the cost of access to services, government’s got to step in, and I think some of the big departments like the department of home affairs and SARS [SA Revenue Service], get it. So we are really engaging with government and departments, working to make more compelling services available.”

She said Telkom was working on something through its wholesale arm that would be “transformative of the market and it’s something that Telkom should have done many years ago”, but would not comment any further.

But it was clear that providing content is a key part of Telkom’s strategy; and Enzo Scarcella, the chief marketing officer, would not directly respond to questions on a possible deal between it and pay-TV content provider DStv.

“It’s a land grab and everybody is talking to everybody and it’s about who gets there first and who makes the right alliance,” Scarcella said.

Maseko said talks with shareholders have been positive, and that relations have been good between Telkom and its biggest shareholder, government.

Maseko said the Public Investment Corporation, which holds shares on behalf of the Government Employees Pension Fund, has bought more Telkom stock and now holds 13.48% of Telkom – from 10.6% previously.

“Foreign ownership is about 14% of the total shares. The US is about 12% and Europe is now growing,” he said.

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