Telkom revenue holds up

By Staff Writer for Telkom
Johannesburg, 22 Jun 2009

Although Telkom grew revenue in the year to March, the company's operating margin declined due to an operating loss from Multi-Links and higher fixed-line operating expenditure.

Reporting its results for the year, the telecommunications company said it had excluded its stake in Vodacom, Swiftnet and Telkom Media from the results, despite the sale of Vodacom occurring after year-end.

After the sale of Vodacom and Telkom Media, the company's operating structure comprises three segments, fixed-line, Multi-Links and other. The fixed-line segment provides fixed-line voice and data communications services through Telkom.

The Multi-Links segment provides fixed, mobile, data, long distance and international telecommunications services throughout Nigeria, through the wholly-owned subsidiary.

Telkom's other segment provides directory services through its 64.9%-owned subsidiary, Trudon, and Internet services in Cote d'Ivoire, Ghana, Kenya, Namibia, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe, through its wholly-owned subsidiary, Africa Online.

Productive year

CEO Reuben September says the “year has been both challenging and very exciting”. He says the company successfully unbundled Vodacom, and returned a R19 dividend to shareholders. It also sold its 75% stake in Telkom Media to Schenzen Media and took its holding in Multi-Links up to 100%.

After the end of the year, Telkom bought M-Web Africa, including AFSAT, from the Naspers Group. “Our footprint in Africa now covers almost the entire continent, excluding North Africa, providing Telkom with opportunities to extend our services to a very fast growing market,” says September.

However, Telkom has not been entirely successful in Africa and has reported impairments, foreign exchange losses and negative fair value effects. Despite this, September says, “we believe Telkom is, however, well positioned to capitalise on these opportunities in Africa”.

Mixed bag

Revenue from the new-look company grew 6.9%, to R35.9 billion, but operating profit decreased by 29.6%, to R6.4 billion. Its earnings before interest, tax, deprecation and amortisation margin dropped to 32.5%, compared to 39.3% last year. This was as a result of a loss of R226 million at Multi-Links and higher fixed-line operating expenditure, which weighed on the fixed-line earnings before interest, tax, deprecation and amortisation margin, knocking it from 36.3% to 25.8%.

As a result of a decrease in operating profits, headline earnings decreased 45.9%, to 557c per share, and basic earnings per share decreased 57.7%, to 407.4c a share.

Structural changes

Telkom says reorganising the structure is “imperative to align the organisation to successfully execute on our strategy and to position the new standalone group as a competitive force”.

The new structure comprises the Telkom Group, with a corporate centre and three operating business units, which are Telkom SA, Telkom International and Data Centre Operations.

Telkom SA is split into three units, which are Network and Wholesale, Enterprise, as well as Consumer. Telkom says the “reorganising seeks to improve profit and loss accountability throughout the organisation and to create distinctive focus for each business unit”.

The new structure aims to “give the business units the agility to focus on customer centricity and cost efficiency and respond to the competitive environment, changing technological landscape and regulatory requirements”.

Delivering on its aim of becoming a “leading pan-African communications company” requires “a compelling and focused transformation programme”. The programme consists of various initiatives, which include Telkom defending its market share, seeking new revenue and businesses, and implementing a structure that enables clear profit and loss accountability, as well as ensuring business processes and work practices deliver on their strategic intent.