During the second last year of its exclusivity period, Telkom has reported a decline in fixed-line teledensity after the company cut off hundreds of thousands of customer lines.
Government granted Telkom the five-year exclusivity in order to force an increase in teledensity and stimulate the roll-out of telecoms services in rural areas.
In its annual report due to be released later today, Telkom says the number of net customer lines declined from 5 492 838 in March 2000 to 4 961 743 lines in March this year, a decrease of just under 10%.
"It is clear that our focus on only profitable customers has hurt our revenue growth and we were forced to disconnect a significant number of customers in the under-serviced areas," says Sizwe Nxasana in the CEO`s review. "A complete review of non-paying customers and a crackdown on commercial fraud resulted in a disproportionate number of fixed-lines being disconnected over the past year."
As a result of the disconnections, the company improved its revenue per line by 22% to an average of R5 335.
Fraud also had a role to play in the 16% increase in bad debt the company reported, with subscription and clip-on fraud of R274 million reported. A total of R945 million in bad debt was written off.
Vodacom grows 70%
In the same period, Vodacom, in which Telkom holds a 50% stake, overtook the parent company for the first time with 5.2 million subscribers reported, a 69% increase on last year. Telkom says about 63% of Vodacom subscribers are considered active.
Vodacom also broke the R10 billion operating revenue mark, with Telkom`s half-share up 45% to R5.2 billion. That represents 16% of the total Telkom group revenue.
Some 79% of Vodacom subscribers were on prepaid packages at the close of the year. Telkom increased its own prepaid customer base to 479 935 customers.
Capex to stabilise
Telkom expects its capital expenditure to decrease significantly next year when competition is introduced into its market and its roll-out requirements are relaxed.
"As we complete our five-year licence obligations and as we enter into a more liberalised environment, we expect our capital expenditure to decline," says Nxasana in the CEO review. "We shall continue to invest in the expansion and modernisation of our network and in new technology development and deployment."
The company expects to have spent R49.5 billion on capital projects at the close of its exclusivity period, which has left it with R25 billion in interest-bearing debt and gearing of 151%.
"While this level [of gearing] is manageable, all parties are in agreement that there is a need for recapitalisation to take advantage of future growth opportunities," says Nxasana, referring to the company`s public listing expected late this year.
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