Telkom says it spent R1.7 billion during 1998 to digitise lines and upgrade its ATM network and ISDN capacity. Almost R1.5 billion more was invested in network rehabilitation.
CEO Sizwe Nxasana says the upgrading of exchanges is ahead of schedule and the entire Telkom network could be ISDN-enabled as early as March next year. A further R10 billion has been budgeted for capital spending during the 1999/2000 period.
"Our network is not reliable and not robust, so we are spending a significant amount of money on it," Nxasana admitted at yesterday`s launch of Telkom`s annual report for the year ended March.
Such spending partly explains the drop in operating profit the report reveals, from R4.29 billion for the 1997/98 financial year to just over R4.2 billion this year. That is despite a R3 billion increase in revenue. Capital expenditure is also the reason for the doubling of interest-bearing debt during the year. Telkom now finds itself R13.5 billion in the red.
The results include all subsidiaries, which includes a 50% stake in Vodacom, 60% of Swiftnet and Internet service provider Intekom.
In a bid to curb the rising operational costs more non-core activities will be outsourced and the workforce will be further reduced. Some 2 000 employees accepted early retirement during the year, but the company says its pay-roll is still a major expense. "We have not ruled out the possibility of retrenchments," Nxasana says.
The report also has a message for those who complain so bitterly about poor service - you are in the minority. The company says it exceeded eight out of its ten service targets, compared to only four last year. According to statistics, only 2.6% of businesses had to wait more than 90 days for orders to be met, and 87% waited less than 28 days. Businesses also reported less line faults, only 350 per thousand lines, but 23% did not have those faults cleared within two days.
The year ahead will see Telkom preparing for two imminent and threatening events: Y2K and the loss of its monopoly.
"All of our mission-critical systems will be ready for the year 2000 by October," says Nxasana. Residential users will be glad to know this includes their telephone system and less pleased that it also includes billing systems.
As for competition, it seems the company can hardly wait. "Quite apart from being anxious to rid ourselves of the baggage that comes with exclusivity, particularly perceptions that it is by definition an anti-competitive measure, Telkom subscribes to the view that competition is an extremely healthy phenomenon," writes chairman Dikgang Moseneke in his review. Telkom, he says, is "eagerly preparing".
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