Telkom back in the black

2014-06-15 15:01

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CEO Sipho Maseko has been on an aggressive cost-cutting campaign, which has paid off to a large extent

It would seem that Telkom has given up on trying to compete directly for a piece of the mobile market and it will no longer have a stand-alone mobile division, according to CEO Sipho Maseko.

Maseko said the mobile unit, which was launched as 8ta and is now called Telkom Mobile, has now merged with its consumer unit.

Mobile has been a thorn in Telkom’s side since it was launched in October 2009.

Maseko has never been happy with the large amount of money going into mobile and was looking for ways to stem the losses. Telkom only managed to increase mobile subscribers by almost 270?000 to about 1.8?million subscribers in its last financial year.

“We will make mobile part of a bundled offering and we will offer it to our fixed-line subscribers and that will give us a consumer base for mobile,” Maseko said.

Telkom recently struck a deal with MTN for the latter to take over financial and operational responsibility for Telkom’s radio access network. Maseko said this would reduce the amount of capital expenditure pumped into mobile.

He said once the deal goes through, it will “bring breakeven [for Telkom mobile] forward by about a year”. Maseko has also been on an aggressive cost-cutting campaign, which saw it shed more than 1?000 employees through a voluntary retrenchment process.

This saw employee expenses drop by about R2.8?billion to R7.1?billion in the year to March, and resulted in a profit for Telkom for the year of R3.9?billion, from a R11.6?billion loss the previous year.

But increasing revenue has been a struggle – revenue grew by just 1% to R32.5?billion.

Although the retrenchment process has caused friction with the unions, Maseko said the relationship was not hostile and they were constantly talking.

The biggest challenge for Telkom, Maseko said, was the process of converting infrastructure already there and making it relevant to the data-hungry consumer.

“For instance, if one looks at public phones, lots of them are struggling. The phones were a service obligation and we had to put them up, but now perhaps we can change them into Wi-Fi spots because the cabling is all there,” Maseko said.

The company has also announced plans to build fibre directly to homes in 20 South African suburbs including Houghton, Craighall, Camps Bay and Clifton. This is the first wave in a process to provide high-speed broadband to consumers, said Maseko.

He also said it was looking at ways to provide over the top content such as video and music.

MTN and Vodacom are also currently in talks with music streaming services to provide that service to its customers.

Maseko is very optimistic for the future and he seems to have a lot of plans, although he is not talking about them all right now. But there is some hope for shareholders who may see a dividend return in 2015, after a three-year drought.

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