Beware Telkom the parastatal

[rpm]

Beware Telkom the parastatal

Cell C is not the only competitor who is breathing down the neck of MTN and Vodacom, an investment analyst has suggested.

 

[rayven_king]

I read this as beware telkom the parasite

 

[Paul Hjul]

I think the PSG advisor has the wrong end of the stick of the Telkom problem Telkom has not received any government bailouts and on the contrary has been a piggy bank for the government, what Telkom has done is been to abuse a monopolistic position which the government sold to it for unfulfilled (and inherently unfulfillable) promises.

8ta is not funded by some sort of cash injection from the fiscus and is a necessary component in moving Telkom from a dying company providing a public utility in a new world into a vibrant IT company that owns a lot of underlying infrastructure. 8ta happened to late and couldn't occur until Telkom unbundled its holdings in Vodacom which was at one stage a cash cow for Telkom.

So yes Telkom as a business as opposed to Telkom as the governments piggy bank might well be in a position to use its cash reserves and so on to gain a foothold in the cellular industry but this is a good thing and it may well be derailed by government interference in Telkom, Telkom SOE will not be able to survive in the mobile communications market and it is struggling to survive at all Telkom Ltd an innovative ICT firm is what is needed. After all 8ta is possible because of the unbundling of Vodacom by Telkom so in effect its not the public purse that can fund giving Vodacom and MTN a punching bag but the money from Vodaphone which was hailed at the time as foreign investment in our telecommunications sector.

The tragedy of Telkom is not that it was funded with public money (a comprehensive debate on the valuation of the asset base in 1991 can be had but it misses the point) but rather that it was an entity afforded a statutory monopoly which it wasted because of various conflicting objectives. It is the tragedy and oppression of state enforced monopolies that is the problem not the providing of public money.

 

[ISP cash cow]

He notes that for a company to post an operating revenue of R33 billion, yet not be able to “make any money” is an indicator of how the company is currently operating.

He said that if Telkom continues to be run like a parastatal, without any real concern over the profitability, and continues to announce competitive prices, “they may yet win market share”.

Don't agree wit this quote. The quote seems to make it out that the reason why Telkom is not making any profit and still posting high revenue is down to the fact that they have low profit products. I would say that it was down to the fact that Telkom cannot manage its funds or its network properly and that is why they have high revenue and low profit.