Call costs hover as profits soar
Telkom reported a 30,3% surge in operating profit to R14,6bn with operating revenue going up 10,3% to R47,6bn; while Vodacom saw profit from operations leap 36,9% to R8,9bn, and its revenue rose 24,6% to R34bn.
With Vodacom customers growing 51,9%, maintaining it as the largest cellular operator in the country, Telkom’s strong results in no small part relied on the success of its 50%-owned subsidiary.
Interestingly, while Telkom continued to fend off attempts to reduce its broadband ADSL fees earlier this year (although it announced reductions that will be effective from July) Vodacom saw its data revenue increase 52,1% to R1,19bn for the year to March, as faster 3G and high-speed downlink packet access (HSDPA) services gain popularity.
Telkom also announced that its contentiously high local call rate would not increase, but its claims that the overall basket of services has come down 2,1% are tempered by an increase in phone-line rental of R7,64 for residential lines and R10,15 for business lines.
“The key issue with Telkom’s rates reductions is that local call charges have not come down and basic phone rental has gone up substantially — in fact, higher than the inflation rate,” says Arthur Goldstuck, MD of researcher firm World Wide Worx.
“As much as Telkom argues that the basket has come down, the core components have not been addressed (local call charge and line rental) in reducing the obstacles to fixed-line penetration.”
This, he warns, is not in the country’s best interests.
“We are constantly being told that the margins are not out of line with what a commercial entity should be able to expect. But this is never stated in the context that a commercial entity (like Telkom) is a virtual monopoly.
“They have a clear and present responsibility to make telecommunications more affordable to all South Africans.”
But as Goldstuck and other industry commentators have repeatedly stressed, Telkom is able to derive the profits it does because of the policies set by government, the preferred treatment it gets from the communications department and the inability of the regulator, the Independent Communication Authority of SA, to effect changes without ministerial backup.
“If truth be told, the networks can’t be blamed for maximising their profits. The fault lies with government for allowing this situation to endure,” he says.
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