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TELKOM [JSE:TKG] customers might be gritting their teeth as they continue to endure poor service, but investors are smiling from ear to ear - they are cashing in on their short-term profits from the company’s share price rally.
On Tuesday this week I was in Aspen Hills, south of Johannesburg, where I met an unhappy Telkom customer. Nine months after the customer applied, he is still waiting for Telkom to install a Long Term Evolution (LTE), also known as a high-speed internet access modem, at his house.
Relating his frustration, the customer recalled how a Telkom technician came to his home to test if the LTE would work. The broadband network was poor and so the technician recommended that a booster be fitted to make the signal stronger.
Good advice, except the customer was the one who had to go back to Telkom’s customer centre and make a request for authority to have the booster fitted.
He is still waiting for the booster. And with each passing month he is getting more frustrated because he cannot use LTE to watch his favourite videos, stream radio stations or browse the internet – all in real time.
How many other Telkom customers are facing similar frustrations?
Customer service might not be satisfactory, but that has not stopped Telkom shares from rising in value.
On Tuesday Telkom shares traded 2.9% higher to close at R60.30 after the company forecast higher headline earnings per share (Heps) for the six months to end-September.
South Africa’s largest fixed-line telephone operator expects normalised Heps to increase by as much as 20%.
Telkom ascribed the increase in earnings to lower termination rates, a drop in expenses relating to the post-retirement medical aid liability, lower asset impairments and write-offs.
The company, worth more than R31bn, will publish its interim earnings on November 17. Even though Telkom expects improved financial figures, it’s still a long way before it makes a profit.
Investors keep the faith
Nonetheless, investors on the Johannesburg Stock Exchange are having faith in the business.
They continue to cheer the leadership of Telkom, under its boss Sipho Maseko, by buying more shares in the business despite its challenges.
As a result, investors have pushed the share price 120% higher in the past year and 52% in the last 90 days.
All in all, Telkom is moving forward, albeit slowly.
Sometimes slow movements are the best way forward, especially if the aim is to do things right.
However, there’s no denying that this ‘turnaround’ will take time and there are still plenty of risks ahead.
What remains to be seen is whether Telkom’s latest turnaround strategy will pick up speed when Vodacom [JSE:VOD] and Neotel start to compete aggressively.
Vodacom, which is owned by British giant telco Vodafone, entered the competition arena for customers in fixed-line networks with its acquisition of Neotel, which will remain a standalone business.
With the backing of Vodafone and Vodacom, Neotel is likely to be a stronger challenger. Hopefully, Telkom might see the sense in improving its customer services.
Neotel could nudge its way in
Neotel could be a bigger player in fibre-to-the-home, a move that could see it provide more scope for Vodacom to deliver content to South Africans. Telkom must be nervous.
Such a development suggests the fixed-line utility needs to speedily finalise its deal with MTN [JSE:MTN], which is set to take over financial and operational responsibility for the roll-out and operation of Telkom’s radio access network (RAN).
One wonders what’s really holding back this deal, which will help Telkom to provide truly converged services in conjunction with the yet-to-be finalised deal to buy Africa’s fastest-growing technology group, Business Connexion (BCX).
Telkom must finalise the MTN and BCX transactions as quickly as possible to diversify its revenue generation, which is too reliant on its fixed-line telephone business.
That said, there is still a lot of value in Telkom.
Finally, the company plans to reinstate dividend payment at the end of the 2015 financial year and this is likely to make investors - who last got a dividend payout in 2011 - happy.
Hopefully customers will get a bit of Christmas cheer too.
A balance between shareholder demands and customer requirements would be most welcome.
- Fin24
*Gugu Lourie is a former correspondent for Thomson Reuters, Business Report, Finweek magazine and Fin24 (writing a blog titled 'Googled'). He is the editor of techfinancials.co.za. Views expressed are his own. Follow him on #twitter @LourieGugu.
On Tuesday this week I was in Aspen Hills, south of Johannesburg, where I met an unhappy Telkom customer. Nine months after the customer applied, he is still waiting for Telkom to install a Long Term Evolution (LTE), also known as a high-speed internet access modem, at his house.
Relating his frustration, the customer recalled how a Telkom technician came to his home to test if the LTE would work. The broadband network was poor and so the technician recommended that a booster be fitted to make the signal stronger.
Good advice, except the customer was the one who had to go back to Telkom’s customer centre and make a request for authority to have the booster fitted.
He is still waiting for the booster. And with each passing month he is getting more frustrated because he cannot use LTE to watch his favourite videos, stream radio stations or browse the internet – all in real time.
How many other Telkom customers are facing similar frustrations?
Customer service might not be satisfactory, but that has not stopped Telkom shares from rising in value.
On Tuesday Telkom shares traded 2.9% higher to close at R60.30 after the company forecast higher headline earnings per share (Heps) for the six months to end-September.
South Africa’s largest fixed-line telephone operator expects normalised Heps to increase by as much as 20%.
Telkom ascribed the increase in earnings to lower termination rates, a drop in expenses relating to the post-retirement medical aid liability, lower asset impairments and write-offs.
The company, worth more than R31bn, will publish its interim earnings on November 17. Even though Telkom expects improved financial figures, it’s still a long way before it makes a profit.
Investors keep the faith
Nonetheless, investors on the Johannesburg Stock Exchange are having faith in the business.
They continue to cheer the leadership of Telkom, under its boss Sipho Maseko, by buying more shares in the business despite its challenges.
As a result, investors have pushed the share price 120% higher in the past year and 52% in the last 90 days.
All in all, Telkom is moving forward, albeit slowly.
Sometimes slow movements are the best way forward, especially if the aim is to do things right.
However, there’s no denying that this ‘turnaround’ will take time and there are still plenty of risks ahead.
What remains to be seen is whether Telkom’s latest turnaround strategy will pick up speed when Vodacom [JSE:VOD] and Neotel start to compete aggressively.
Vodacom, which is owned by British giant telco Vodafone, entered the competition arena for customers in fixed-line networks with its acquisition of Neotel, which will remain a standalone business.
With the backing of Vodafone and Vodacom, Neotel is likely to be a stronger challenger. Hopefully, Telkom might see the sense in improving its customer services.
Neotel could nudge its way in
Neotel could be a bigger player in fibre-to-the-home, a move that could see it provide more scope for Vodacom to deliver content to South Africans. Telkom must be nervous.
Such a development suggests the fixed-line utility needs to speedily finalise its deal with MTN [JSE:MTN], which is set to take over financial and operational responsibility for the roll-out and operation of Telkom’s radio access network (RAN).
One wonders what’s really holding back this deal, which will help Telkom to provide truly converged services in conjunction with the yet-to-be finalised deal to buy Africa’s fastest-growing technology group, Business Connexion (BCX).
Telkom must finalise the MTN and BCX transactions as quickly as possible to diversify its revenue generation, which is too reliant on its fixed-line telephone business.
That said, there is still a lot of value in Telkom.
Finally, the company plans to reinstate dividend payment at the end of the 2015 financial year and this is likely to make investors - who last got a dividend payout in 2011 - happy.
Hopefully customers will get a bit of Christmas cheer too.
A balance between shareholder demands and customer requirements would be most welcome.
- Fin24
*Gugu Lourie is a former correspondent for Thomson Reuters, Business Report, Finweek magazine and Fin24 (writing a blog titled 'Googled'). He is the editor of techfinancials.co.za. Views expressed are his own. Follow him on #twitter @LourieGugu.
