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Telkom SA buoyant despite challenges

Telkom SA buoyant despite challenges

South African telecommunications services provider Telkom has posted its interim results for the six months ended 30 September 2015 and Group CEO Sipho Maseko has singled out the company's mobile business and cost efficiency program for its contribution to what he described as the "improved performance" of the company.

Company transformation and stabilising revenue were the main focus points for the company during the period under review.

According to the results the company's EBITDA, excluding the one-off items, improved 15.1% to R5.0 billion, headline earnings per share, excluding the one-off items, increased 13.9% to 280.6 cents, mobile service and subscription revenue increased 41% to R1.2 billion, while mobile data revenue increased 69% to R711 million.

Leadership confirmed that it was faced with challenges including increasing competition and a "soft economy".

According to Telkom fixed line usage continues to decline, with fixed voice revenue decreasing by about 3% compared to the same period one year ago. Data connectivity dropped by more than 5% compared to the same period one year ago, impacted by competitors' self-provisioning of infrastructure and the intentional migration of customers from leased lines to next generation service offerings.

"Excluding revenue from leased lines, fixed data revenue is up more than 4 percent. Telkom also achieved good growth in the consumer business with revenue from ADSL growing in excess of 5 percent," the company stated.

Maseko added, "The challenges of intense competition, the soft economy and the evolutionary nature of the industry we find ourselves in will remain. As a result, the ongoing transformation of our business, from both a revenue and cost efficiency perspective, remains our key focus."

More revenue streams

The company has also made reference to its service portfolio, particularly the introduction of funeral cover after having secured a financial services provider license.

Moreover, the company suggests that its recently launched new-look wholesale division, Openserve is a first step in the objective to implement "a more flexible and agile operating model."

Local industry analyst and CEO of Strategy Worx, Steven Ambrose explains that the move to diversify revenue streams is well-considered and timely. "The company has to find alternatives to its current revenue mix and financial services are an obvious choice. Time will tell if this particular effort beard fruit, but the move will continue with more and more offers and products being offered in the future."

Ambrose likens the Openserve model to that followed by BT and says that if the separation is handled properly and Openserve is allowed to compete fairly and freely within the current market, it will prove to be a smart and ultimately profitable move.

"Openserve already has a near monopoly in certain services and this move should allow greater transparency of operation and a greater ability to stay ahead and compete with the other companies in the market, most notably the mobile operators who are becoming fully integrated telecommunication operators more in line with Telkom," he adds.

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