TELKOM ’s efforts to expand its activities and its footprint have backfired badly, with its Nigerian operations losing R1,76bn and its listing on the New York Stock Exchange being scrapped as a waste of money.<\/p>\n
It has already pulled out of Telkom Media, selling it to China’s Schenzen Media.<\/p>\n
Since Telkom’s future depends on reinventing itself to successfully fill the huge gap left by shedding its 50% stake in Vodacom , its executives may face tough questions when they present its results to analysts this morning.<\/p>\n
Figures for the year to March 31 show its operating profit tumbled 29,6% to R6,4bn from R9bn a year ago, despite an operating revenue rise of 6,9% from R33,6bn to R35,9bn. Headline earnings per share almost halved from R10,29 to R5,57 for continuing operations.<\/p>\n
Now it is aiming to cut operating costs 10%, and says delisting in New York will help as its presence there is expensive.<\/p>\n
It is still committed to its Nigerian subsidiary, Multi-Links, which it bought for 410m, but those operations are unlikely to be cash- flow positive until 2011 or 2012.<\/p>\n
CEO Reuben September said the year had been challenging, and acknowledged that Telkom’s forays into Africa were beset by high start- up costs, unknown and competitive markets, infrastructure challenges, a lack of skills, and volatile currency and interest rates.<\/p>\n
He said the financial damage was clearly visible but Telkom should capitalise on those African activities in the future.<\/p>\n
Yet he warned that setting targets in this rapidly changing industry was inherently risky, and that investors should not place undue reliance on achieving them.<\/p>\n
Telkom recently acquired M-Web Africa for 63m to help it become a pan-African voice and data supplier and its footprint now covers most of the continent, giving it the chance to extend into a fast- growing market.<\/p>\n
Analyst Spiwe Chireka of the international consultancy Frost & Sullivan said the market was adopting a wait and see approach, as Telkom was yet to provide a clear picture of how it would grow.<\/p>\n
“The sale of Vodacom has cast doubt on the future performance of the company, as it continues to be viewed as a fixed-line operator. Telkom needs to reposition itself as a matter of urgency,” she said.<\/p>\n
Fixed-line services were losing ground to new technologies so Telkom needed to learn from Vodacom and MTN and become an integrated telecommunications provider, she said. Vodacom generated roughly 45% of Telkom’s revenue, but its figures will no longer boost Telkom’s results after it was unbundled last month.<\/p>\n
The unbundling gave Telkom’s investors shares in the newly listed cellular operator and a handout of R19 a share. With annual dividends, investors are receiving R22,75 a share. Telkom has retained about R10bn from selling 15% of Vodacom to the UK’s Vodafone, to fund new initiatives and an entry into new countries.<\/p>\n
September said the revenue from voice calls was falling as people used cellphones instead, so it must explore all avenues of growth and bring traffic back to its network. To do that it needs a mobile service of its own, and was investigating how best to do that.<\/p>\n
Market speculation has suggested it could tie up with Cell C or pan-African player Zain, but Telkom did not comment.<\/p>\n