Telkom plans separating business functions

Johannesburg - Telecoms company Telkom plans to separate its business along clearer lines into retail, wholesale and enterprise focus areas in the coming months and years.

This is according to the group chief executive officer of Telkom, Sipho Maseko, speaking to Fin24 in an interview on Monday.

Maseko was unclear on when this separation would happen exactly, as he said it could take time.

Currently, Telkom operates as a single integrated business in which the likes of its wholesale and consumer focuses are housed under the same brand.

"One of the reasons why we are separating these businesses into three is because we have a core hypothesis that the parts are more valuable than the sum,” Maseko told Fin24.

"Each of these businesses need to be geared to meet different customer needs.

“So, today Telkom at a global level; I've got a whole lot of different customers. I have you as an individual with your household. At the same time I've got a business. It may be a large business; it may be a small business. At the same time I have another ISP (internet service provider).

"So, therefore it is complex and by doing this, actually the wholesale business will focus on the ISPs, make sure that those are their customers, the culture is different, the performance incentives are different, the targets are different and they have to treat all of their customers on an equivalent basis,” Maseko said.

The separation is further intended to form part of Telkom’s second stage regarding its turnaround process, which to date has involved cutting costs in the business.

Earlier this year, Telkom announced restructuring in which it planned to implement "cost efficiencies" in its Direct Stores as well as its call centres, IT Legacy Systems and internal printing, supply chain and properties.

Subsequently, the company has undergone outsourcing its call centres while jobs are expected to be cut at Direct stores that have been earmarked for closure.

Telkom is further set to have formal meetings with labour unions on Tuesday.

Accountability and competition

Maseko also re-emphasised how the clearer distinctions among Telkom’s business focus areas are expected to help boost its accountability and even internal competition.

"So, firstly it will bring about the right level of clarity; the right level of taking out the complexity in the organisation and also taking out the multiple hand-offs,” Maseko told Fin24.

“You know, today if there is a problem on your mobile, if it's a Telkom mobile, and you're at work... the consumer guys looks at the enterprise guy who looks at the network guy

"In that new order, actually the accountability will be very clear. So, one of the things that we are really pushing is to have the right accountability within the business for the different customer groups and segments that we will be serving," Maseko added.

Maseko also said that the wholesale business will be making its services available to all service providers “on a non-preferential basis”.

"It will be competitive for our retail guys, but competition is good and we need to embrace competition. It makes us better; it should make us better,” Maseko said.

Maseko made his comments about the separation of Telkom’s focus areas after the telecoms company announced its annual results for the period ending March 2015.

Chief highlights of its results included that its group net revenue increased 3.1% to R26bn while its Ebitda (earnings before interest, taxation, depreciation and amortisation) rose 15.1% to R9bn.

The group further reported a profit after tax of R2.9bn which is 19.5% lower than the R3.6bn recorded in March 2014. In addition, the company said that its number of ADSL internet lines surpassed one million but that its total number of fixed-lines fell 4.9% during the period from 3.618 million to 3.439 million.

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