Telkom reveals new strategy
In many cases, competition is the driving force behind these changes.
The international trend towards liberalisation and privatisation exposed firms in the US, Europe and Asia to market forces some time ago. However, for SA’s Telkom, much of the pain has yet to come.
In 1998, government sold a stake in Telkom to US and Malaysian investors for a hefty sum. In return it gave the organisation a five-year monopoly.
Telkom listed in 2003, but government retained a 38,5% stake in the company. While there has been some competition introduced to the market, there is a clear intention from government to go much further. The pressure is on Telkom.
CEO Papi Molotsane says the South African telecoms landscape is changing rapidly.
Increasingly complex technologies and products are being introduced to the market, while better informed customers are demanding increasingly sophisticated applications.
The regulator is making demands on Telkom with tighter regulations, key among them being cost based pricing.
Competition is growing too, with the long-awaited second national phone operator (SNO) due to begin operating later this year, carrier preselection being introduced and Value Added Network Providers (VANS) being allowed to use Voice over Internet Protocol.
Molotsane says Telkom, which currently gets about 80% of its revenue from voice services and 20% from data services, cannot rely as heavily on voice in the future.
"We need a new approach. A new way of thinking," he says.
This new approach, outlined yesterday at an analysts presentation, rests on five pillars.
They are: improving customer relationships (called customer centricity); retaining revenue while generating growth; engaging Telkom’s people; evolving to a broadband-based next generation network; and improving Telkom’s relationship with stakeholders.
Key to the new strategy is a five-year, R30bn investment and acquisition strategy.
This will involve investing about R15bn in the new broadband-network and improving customer relations, while the remainder will be pumped into new acquisitions, upgrading of old networks as well as legal and regulatory issues.
The group recently launched a R2,43bn bid to take over technology firm Business Connexion.
However, Molotsane says Telkom will be prudent with any investments. "I have no doubt that (these) plans will allow us to retain our performance," he says.
There was concern among analysts on Thursday about Telkom’s statement, issued on Wednesday, that the forecast for earnings before interest, tax, depreciation and amortisation margin had fallen to a range of 35%-40% for the year to March next year from 40%- 44% previously.
Telkom chief financial officer Kaushik Patel says the expected margin drop is due to the fact that revenue is likely to remain static or fall slightly.
He says increased capital expenditure and acquisitions will also affect margins.
INet-Bridge
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