Telkom: Storm doesn't understand profit model

[rpm]

http://www.mybroadband.co.za/nephp/?m=show&id=215

"Storm doesn't understand how to measure profitability and its analysis contains serious errors, says Telkom, which blames the media for erroneous reporting and a lack of understanding of its business."

[playkiller no.2]

No! Telkom you don`t understand that we sick of your Bull****!

\0/ Go Storm

[Gaz{M}]

We don't give a ***** what you say. Expensive is Expensive. I don't care who you compare it too, it's still EXPENSIVE! I don't care if they charge R100 a minute to phone the corner cafe in Sudan. That's expensive. So is 16c a minute for a local SA call. Stop trying to justify everything with confusing financialese. We don't believe you because you lie ALL the time. Now sod off..

[WickedWeasel]

You see, you can measure profitability by two means

Providing a decnet service and making decent money - normal people

Providing a **** service and ripping everyone off - Telscum.

The basics of Economics 101

[bHOLDher]

Uhm, so if you buy assets, and you can't pay cash, you are not making a profit? Is that what telkom says? I want to own a business that can do that!

Oh, wait, that reminds me of a company that _closed down_, they put assets' cost up as an expense. Tell me if i am being stoopid.

[greywolve]

doesnt matter how much they try and justify it, the fact remains telkom is the most expensive in the world. imo they are also slowing down potential growth of this country by making internet so expensive

[kaspaas]

Lesson no 1 on How to increase profitability:

Repair all faults within 24 hours after they are reported.

Telephones out of order don't generate income, only frustration. Frustrated customers call the call centre more often, and that costs money because more staff are needed to handle the additional calls.

Lesson no 2: Fire all incompetent technicians. They cause even more frustration as they can't fix faults. Having to send out many technicians is an expensive exercise.

Moral of the story: Telkom can increase their profits by simply improving on service levels.

[RoosTa]

There is a saying: if you want to be successful, surround yourself with successful people.

Telkom, however, want to be the King of maggots!

[stoke]

3,8 bil profit from 43.7 bil assets.

= 8.7 % profit margin

So - say my house costs 100 000.
I want to rent it out.
I buy the house cash, like teklom did.
The house must pay for itself in 5 years, just like teklom assets must.

100 000 / 5 years = 20000 a year. = 1666.66 a month + 8% profit = 1800 a month.

5 years down the line I use the cash generated from that house to buy another house.
1800 * 5 * 12 = 108 000.00

All i've made is 8000 bucks.

Now this is not enough to buy a better house, so now what do I do ?
This is the point that teklom is making.

I cannot argue with these figures, but, are these figures correct ?

[WickedWeasel]

Here is a thought.

How much would you demand as a salary if you were the CEO of the most hated company in the world, make you wonder.

[stoke]

I'd do it for a cool 3mil a year. No - seriously.

[arf9999]

Yes....but the fact is that Telkom is NOT selling those assets. While they may depreciate the value of those assets over time (5-10 years), the fact is that they are still generating revenue from those assets.

Your example is flawed because you are forgetting that you now own the house outright AND you have R108 000 cash. Your accounts say that the house is worth nothing, 'cos you've depreciated the value over five years. This is the way that Telkom is Bullsh*tting the consumer.

<edit> If Telkom owned the house, you'd be charged R18,000 per month....

[bHOLDher]

nodnod on what arf said.

[mbs]

In addition to which, you're presupposing that you need cash to buy another house, that you will buy a house of the same type as the one you have, at the same level of expense as originally incurred, and subject to the same operating/maintenance cost as the first - all of these are not necessarily true. Yes, it's a simplistic analogy, but it certainly highlights how easy it is to hoodwink people into believing something when they apparently have no insight into the real facts...

[Decotey]

Well hard to post now, you guys pretty much summed it up

[Mux]

3,8 bil profit from 43.7 bil assets.

= 8.7 % profit margin

So - say my house costs 100 000.
I want to rent it out.
I buy the house cash, like teklom did.
The house must pay for itself in 5 years, just like teklom assets must.

100 000 / 5 years = 20000 a year. = 1666.66 a month + 8% profit = 1800 a month.

5 years down the line I use the cash generated from that house to buy another house.
1800 * 5 * 12 = 108 000.00

All i've made is 8000 bucks.

Now this is not enough to buy a better house, so now what do I do ?
This is the point that teklom is making.

I cannot argue with these figures, but, are these figures correct ?
This needs a little correction:
1. The rent would go up every year by 8% (not just the origibal 8% profit).
2. The property would probably get sub-divided and the garage would now cost extra. If you park a car it would be one price and for a 4x4 another (or something like that).
3. After Year 5 the same house would be charged a the increased price, compounded over the past 5 years - making year 5: R2,448/month
4. Year 6 the FULLY "depreciated" house would be not the original 8%, but the new R2,644 per month. Making a profit of % now?

This excluding the fact that they would have probably generated an extra income for the garage portion!

Yes, you are right, we don't understand how to rip people off (and sleep at night!)

[stoke]

Rethink :: I have 108 000 bucks - and an asset that still earns me revenue 1800 of a month.

I can now buy another house at 100 000.

I could drop the rent on the first house to 900 bucks, and rent this new house out at 900 bucks cos my costs are exactly the same, and i'll make the same profit and eliminate all my competition. (Simplistic I know)

BUT
- Teklom seems to rent the old and new houses out at 1800.

Now - how do you get that kind of info from their financial data?

[Gooku]

Gooku: Telkom doesn't understand profit model !

or It deploys a foolish business model (previously modeled with foreign share-holder influence)

"Telkom is killing the goose that lays golden eggs"

Over-pricing & excessive profiteering practices have resulted that Businesses and individules can no longer communicate cost-effectively in this country.

While many land lines have already been disconnected (due to overprice) ,those ones still have landline can not afford to use them effectively and it is restricting business and social activities.

The worst part of it, is that OUR PSTN network(mostly) built with tax payer's money ,is just laying there under-utilized ,being wasted !


Telkom need to engineer a new model for its business,it need to expand and provide its services to more South Africans.to achieve a better economy of scale and better utilization of PSTN network as a whole.

[nOhIwAy]

“Storm fails to understand how profitability should be measured.
The measure of profitability is what return is made on its investment, and whether that return is in excess of its cost of capital


Wow ! - Did they really write this .......?

Investor return (ROI) is equated to (GP or NP) operational performance ???????

What they really saying (and only a monopoly could do this) :

We calculate what investment return we need, run the monopoly model .......
(don't forget to include the executive bonuses and ............

out pops the price of local phone call per minute ..... neat heh.

[nocilah]

Telkom fail to understand that other companies are not a monopoly and actually rely on good prices and good service to make money and profits.

So unless they let up we all just carry on supporting those fighting the beast.

[MaD]

Greed is a nasteh thing, and Telkom is a prime example of a monopoly who is abusing its position and who is going to see its arse as soon as other options are available and regulations become favourable.

When Telkom's ship sails I will be at the docks waving my hankie and crying.. although the tears will be those of extreme joy and relief.