How could it happen? How could a company with strong cash reserves, extensive assets and an unfair advantage established over decades of monopoly mess up as badly as Telkom has? A long series of bad management decisions has brought Telkom to this point, eroding a potentially formidable business into the stooge it is now.
is far from a hospital case in its current form and is showing some positive signs for the future. However, it’s a mere shadow of the African telecommunications powerhouse it was poised to become.
Though Telkom is the market leader in wholesale voice and data services in South Africa, it hasn’t protected its assets in the sector and is losing ground to competitors. It had the ability to become SA’s first true “triple play” provider in the consumer sector but missed the opportunity. Africa lay open before it but Telkom chose bad investments and a staid approach. And Telkom has now finally broken into the mobile market – but much later than it should have and without leveraging its other business units.
It all comes down to bad management. Telkom finally has competent leadership in place, the poster child for which is new CEO Nombulelo Moholi
. But the mess left behind by her predecessors is going to require miracles to sort out. Telkom should have followed the example of international providers that bundle fixed-line television, data and voice services to consumers, while also scaling up to meet competitors in the corporate market and making the right decisions north of SA’s borders.
International case studies weren’t hard to find. It could have looked to BT – formerly British Telecoms – the incumbent network operator in Britain that successfully transitioned from state-owned dinosaur to private powerhouse with successful operations elsewhere in Europe. BT’s wholesale model, especially in last mile connectivity, is the sort of thing Telkom should have implemented when Altech kicked the market open after a High Court ruling in 2008. Instead, Telkom clammed up and didn’t see the gaping void created for it to fill.
It was so close to also having all the bits and pieces it needed for a triple-play after Telkom Media and the launch of Telkom Mobile. It should have disinvested in Vodacom Group [JSE:VOD]
sooner and got its own mobile operations off the ground with the money it made from the sale.
Telkom had a licence to compete against Naspers [JSE:NPN]
’s MultiChoice in the pay-TV sector with Telkom Media. Telkom could have gone to the market with a play that MultiChoice can only dream of: get your DSL Internet connection, pay-TV channels, home and cellular telephones all from one provider with one account and a single bill. It would have been a killer offering. Only Telkom could have done it. The rest of the market was a decade behind, at best.
Instead, Telkom Media was run into the ground. It could have been fixed but Telkom inexplicably opted instead to sell it off, eventually passing it on to China’s Shenzen Media. Goodbye triple-play.
Telkom’s consumer mobile brand – 8.ta – was launched without being consolidated with the group’s other offerings. The service has got off to a good start in terms of a subscriber base, despite costing the company heavily in its launch year. There’s traction, even if its average revenue per user (ARPU) currently looks dismal. But it could have been so much more.
Telkom’s worst decision came in the form of Multilinks – the failing Nigerian business it acquired for R2,8bn and has spent more than R5bn writing it down since. In his term as acting CEO of the Telkom group, Jeffrey Hedberg
brokered a sale of Multilinks, having himself run the business after leaving Cell C. Hedberg’s parting gift was the sale of this useless investment for US$52m to Visafone. But it wasn’t to be. A High Court ruling about site lease agreements has halted the sale and Telkom now faces the possible liquidation of Multilinks.
Although Moholi told investors Telkom would still look for growth opportunities in Africa it’s very late to the game and I don’t think anyone gives it a serious chance against the likes of Bharti Airtel and MTN. Not now.