Telkom Produces Sorry Results but Promises Reform

There was a stench of sewage in the underground car park of the Jo’burg Hyatt Hotel this morning. I am sure it had nothing to do with the event being hosted upstairs – the financial results presentation for Telkom up to March 2013. Troubled Telkom brought out a depressing set of financial results. Headline earnings were down 73%, revenue is in decline – and the presentation followed the announcement early this week that the semi-parastatal telecommunications giant had impaired assets to the tune of R12bn. The presentation included an admission that things are going badly and a warning of further job cuts. Although this was very sobering, no booze was on offer after the event.

Expert Comment:

Mario Pretorius from Telemasters:

Telkom is the almost invisible 800kg gorilla in the room. It is massive, dominant, patient and actually very good at what it does – except everyone expects it to deliver results like a pure-profit company. It is hamstrung by political constraints; it cannot right-size, tame its unions or choose where to provide its services. Should it be able manoeuvre like an MTN, it would be in the 20% return on sales category and a monster of note. The effect of the lowered interconnect rates reflects in the almost tripling of profits to a measly 1.4% of sales. It’s time Telkom delists to fulfil a social mandate – or gets serious about competing as a listed entity. Its hybrid status detracts from its goals.

Malcolm MacDonald from Tersos:

Although I applaud the rollout of a national fibre network, it is still a long way off the reach and cost of broadband offerings available in Europe. 40Mb/s for around R700pm, PLUS the line rental, is expensive. Having said that, the process and efficiency of installations is much improved. It is high-time the pure internet offerings decoupled from the voice-line becomes a reality. Smaller households use cellular telephony and fixed Internet Data. My peers and I seldom use a Telkom phone-line anymore – we just use data. Obviously Telkom knows this – it is hurting their bottom line, but the strategy to counter this, somehow does not seem innovative enough. In general I have been happier with Telkom service lately, and Telkom Mobile is very well-priced. I cannot fault CEO Sipho Maseko’s approach – I hope they can speed things up, get prices in-line with European offerings and continue to take accountability as they have demonstrated this year.

Ron Klipin from SA Stockbrokers:

They are busy diagnosing the problems at Telkom. The jury is still out. What is positive is the cash flow generation. Leadership appears to be more knowledgeable and focused. Taking a wide perspective of the group there are still challenges from the regulator and general government interference remain a concern.

Tweets of the Day:

Lesley Stones (@Lesley_Stones): (John) Cleese explaining how he learnt to do an SA accent for Spud – keep a very tight sphincter at all times!

Tony P. (@Steelers1972): How to be a bouncer: 1) be an asshole. 2) stand near a door.

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