Telkom tackles post-Vodacom era

Johannesburg - As telecommunications giant Telkom adjusts to life after Vodacom, its main priority is to turn its offshore operations around and use them as springboards for expansion.

CEO Reuben September said Telkom aims to make all its offshore operations profitable within two years.

Prominent among these is the money-gobbling Nigerian subsidiary Multi-Links, which recorded a net loss of R1.76bn in the past financial year.

"Turnaround aspects are already in play to get our new operations like Multi-Link profitable as soon as possible," said September. "Vodacom consumed a lot of time from our top management, but now there will be no distractions."

Telkom sold its 50% stake in Vodacom in May. Britain's Vodafone bought 15%, while the remaining 35% was listed on the JSE. On Monday, the company announced a 45.9% drop in earnings per share for the year to end-March, excluding revenues from its former Vodacom stake.

"Once we're able to get the businesses that we've acquired to be successful, they will act as launching pads for other African operations," said September. However, the group has slashed its initial five-year capital expenditure budget by 40% to R34bn and intends to reduce it further where possible.

"We will be absolutely prudent where capital expansion projects are concerned to ensure cash flow is improved," he said.

Time for a focus change

Gryphon Asset Management's Jan Meintjes said Telkom's success will depend on its ability to turn around losses such as those incurred by Multi-Links.

Frost & Sullivan ICT analyst Spiwe Chireka said Telkom urgently needs to reposition itself.

"The sale of Vodacom has cast doubt on the future performance of the company, as it continues to be viewed as a fixed line operator," said Chireka.

"Given that fixed line services are losing ground to new technologies, it is important that it takes a page out of the books of mobile operators like Vodacom and MTN." According to Chireka, these companies are repositioning themselves as integrated telecommunications providers and promoting this image.

However, September said Telkom will not replicate existing cellphone operators which have strong brands and customer loyalty.

"We're looking at our fixed line strengths as the backbone of the communication structure of our economy and to combine them with the strength of our network," he said, adding cellphone expansion will take place if returns are guaranteed.

"It's a complex industry and I predict that it will be difficult to recognise Telkom from its former self in two years' time."

- Fin24.com