ghoti
08-04-2006, 04:28 PM
Presenter: Lindsay Williams Guest(s): Ian Timmerman
Telkom announces they will be keeping their cash to re-invest in the business, rather than giving it to shareholders. Classic Business Day gets Ian Timmerman from the treasury department at Telkom into the studio to talk about the announcement that sent the Telkom share down 7% on the JSE
LINDSAY WILLIAMS: Some people have golf days, others have analyst days - I bet Telkom wishes today was a golf day - at the end of trading their JSE share price had fallen sharply. Ian, what surprised the market so much?
IAN TIMMERMAN: I think the surprise was mainly around the earnings before interest, tax, depreciation and amortisation (Ebitda) guidance - in September 2005 we announced an Ebitda margin of 44% and today we came out with a guidance of between 37% and 40%.
LINDSAY WILLIAMS: Why the reduction?
IAN TIMMERMAN: The reduction is mainly driven through increased costs going forward - we’ve implemented a new strategy where we’re going to be implementing a next-generation network, and we’re also focusing on customer-centricity - these initiatives have resulted in increased costs.
LINDSAY WILLIAMS: So you’re investing in the long-term for the company - speaking to brokers who are very keen on your share, and have been for so long and rightly so - they were looking for a great big juicy special dividend, distribution to shareholders and share buy-backs. What you’re saying is: “We do have the money, but unfortunately the future of the company comes first.” Do you think this is a slightly naïve reaction from the JSE?
IAN TIMMERMAN: The analysts obviously do understand the company relatively well - I think a lot of them have commented that our guidance may be conservative. The concern is that we may be spending too much too soon. We have tried to come across today to say these initiatives are necessary - there is a changing landscape that we have to deal with, and for Telkom to be around and make profits in the long-term we have to do these sooner rather than later.
LINDSAY WILLIAMS: The headline was that the fixed line capital expenditure requirement over the next five years amounts to R30-billion - is this something new to the market that six months ago wasn’t a factor when analysts looked at the Telkom share?
IAN TIMMERMAN: We did try and guide the market during our interviews with them, but this is a new business plan - it was only recently approved by the board of directors, and today was really the first opportunity where we were able to give specifics.
LINDSAY WILLIAMS: The BCX transaction has hit the headlines - there are all sorts of regulatory issues that may come about. When I spoke to another of your colleagues a couple of weeks ago he suggested - I think he was in charge acquisitions - that there would be more acquisitions. Do these expenditure plans mean those potential acquisitions might be pushed aside?
IAN TIMMERMAN: Not necessarily. I think it would depend on the size and nature of the acquisition, but we’re going to be looking at opportunities as they come about - how they’re going to be funded would be the main driver of how we utilise the cash.
LINDSAY WILLIAMS: Is the coming second network operator (SNO) the main reason for this massive five-year rollout?
IAN TIMMERMAN: Not necessarily. They do impact us through competition, however there are regulatory issues, there are technology issues. Technology is moving rapidly - our current services will not be able to deliver the products of the future, and that’s also driving it.
http://transcripts.businessday.co.za/cgi-bin/transcripts/t-showtranscript.pl?1144354841
Telkom announces they will be keeping their cash to re-invest in the business, rather than giving it to shareholders. Classic Business Day gets Ian Timmerman from the treasury department at Telkom into the studio to talk about the announcement that sent the Telkom share down 7% on the JSE
LINDSAY WILLIAMS: Some people have golf days, others have analyst days - I bet Telkom wishes today was a golf day - at the end of trading their JSE share price had fallen sharply. Ian, what surprised the market so much?
IAN TIMMERMAN: I think the surprise was mainly around the earnings before interest, tax, depreciation and amortisation (Ebitda) guidance - in September 2005 we announced an Ebitda margin of 44% and today we came out with a guidance of between 37% and 40%.
LINDSAY WILLIAMS: Why the reduction?
IAN TIMMERMAN: The reduction is mainly driven through increased costs going forward - we’ve implemented a new strategy where we’re going to be implementing a next-generation network, and we’re also focusing on customer-centricity - these initiatives have resulted in increased costs.
LINDSAY WILLIAMS: So you’re investing in the long-term for the company - speaking to brokers who are very keen on your share, and have been for so long and rightly so - they were looking for a great big juicy special dividend, distribution to shareholders and share buy-backs. What you’re saying is: “We do have the money, but unfortunately the future of the company comes first.” Do you think this is a slightly naïve reaction from the JSE?
IAN TIMMERMAN: The analysts obviously do understand the company relatively well - I think a lot of them have commented that our guidance may be conservative. The concern is that we may be spending too much too soon. We have tried to come across today to say these initiatives are necessary - there is a changing landscape that we have to deal with, and for Telkom to be around and make profits in the long-term we have to do these sooner rather than later.
LINDSAY WILLIAMS: The headline was that the fixed line capital expenditure requirement over the next five years amounts to R30-billion - is this something new to the market that six months ago wasn’t a factor when analysts looked at the Telkom share?
IAN TIMMERMAN: We did try and guide the market during our interviews with them, but this is a new business plan - it was only recently approved by the board of directors, and today was really the first opportunity where we were able to give specifics.
LINDSAY WILLIAMS: The BCX transaction has hit the headlines - there are all sorts of regulatory issues that may come about. When I spoke to another of your colleagues a couple of weeks ago he suggested - I think he was in charge acquisitions - that there would be more acquisitions. Do these expenditure plans mean those potential acquisitions might be pushed aside?
IAN TIMMERMAN: Not necessarily. I think it would depend on the size and nature of the acquisition, but we’re going to be looking at opportunities as they come about - how they’re going to be funded would be the main driver of how we utilise the cash.
LINDSAY WILLIAMS: Is the coming second network operator (SNO) the main reason for this massive five-year rollout?
IAN TIMMERMAN: Not necessarily. They do impact us through competition, however there are regulatory issues, there are technology issues. Technology is moving rapidly - our current services will not be able to deliver the products of the future, and that’s also driving it.
http://transcripts.businessday.co.za/cgi-bin/transcripts/t-showtranscript.pl?1144354841