Telkom profits under pressure

By Kimberly Guest for Telkom
Johannesburg, 30 Jan 2008

Fixed-line telecommunications operator Telkom admits SA's widespread power shortage could impact its revenue and operating expenditure.

This is on top of the challenges outlined in the company's 2007 annual report, which included reduced tariffs, increased competition, migration from dial-up to ADSL services and the introduction of cost-based interconnection.

Telkom acting group executive for corporate communications Nabintu Petsana says the telecoms giant has been able to ensure its network is largely unaffected by the power outages. However, side effects of the load-shedding outside of its control are beginning to impact the company, she admits.

These include additional manpower and diesel costs associated with keeping critical sites running; inability by some customers to receive and make calls due to lack of backup power supplies on those premises; increased pressure on the company's call centre from PABX reconfiguration calls; and an inability to complete installations and repairs when power is unavailable for technicians' tools.

Cautiously upbeat

For now, investor analysts are reasonably positive on Telkom's prospects.

One analyst, who asked not to be named, explains: "Telephones generally don't need power to run on and most businesses have either installed, or are in the process of installing, backup power for their communication systems. If the power outages were to affect their network, that would be a different story, but in the past month we have only seen a couple of problems."

Arthur Goldstuck, MD of World Wide Worx, notes that what Telkom loses in lost calls on its fixed-line network could be partially regained from its 50% interest in Vodacom.

"For Telkom, it's a case of swings and roundabouts. When people lose their fixed-line, they turn to their cellphones and wireless data cards. Telkom also started marketing entry-level uninterruptible power supply (UPS) systems quite a while back, so they really have tried to do their bit to protect against a negative effect," he says.

However, Andre Wills, MD of Africa Analysis, points out that Telkom's Vodacom interest may not be enough to protect it from the knock-on effects of the outages.

"The fact is, if you can't make a phone call, that revenue is lost. Some of that will probably be recouped through increased activity on Vodacom's network, but Telkom only receives a portion of those earnings," he explains.

As for the UPS systems businesses are in a hurry to procure, Wills notes that these only operate for a finite time before returning the environment to a no-communications zone.

Wait and see

Although Telkom acknowledges additional pressure on its operations, Petsana says she is unable to comment on how this could influence its financial performance.

"It is still too early to determine the impact on our revenue and operating expenditure," she explains.

T-Sec economist Mike Schussler sympathises: "I would have to say there must be some effect at the end of the day for Telkom. What that impact will be, is currently impossible to tell."

Despite downward pressure on SA's markets, Telkom has been able to reclaim most of its early 2008 share price losses through the announcement of an unsolicited offer from Oger Telecoms.