Johannesburg, 15 Nov 2005
The Telkom interim results were interesting and could indeed be a precursor of things to come for the company, says BMI-TechKnowledge telecoms analyst Richard Hurst.
According to Hurst, the results highlight there is indeed still massive opportunity in the local telecoms market, with the fixed line proportion of the business still accounting for 77% of the group profits. The 44.5% earnings before interest, taxes, depreciation and amortisation (EBITDA) margin "will be something to look at as we move forward into a competitive fixed line telecoms market," he says.
In addition, the arrival next year of a competitor in the fixed line space will force the company to continue enhancing its operational efficiency.
Telkom reports there has been a 22% improvement in fixed lines per employee, 8% reduction of its vehicle fleet size as well as an increased reliability of the network.
Hurst also notes the 29% growth in fixed line profit driven by Telkom`s data services, the 17.5% growth in data revenues, as well as the stellar 161% growth of ADSL. He says the migration to an IP-centric network should also stand the operator in good stead. However, it will take time and capital expenditure to roll out.
Telkom as a supplier and competitor
In its positioning statement, Telkom expresses its intention to move up the value chain by becoming a "value adding ICT solutions provider". The company will have to find a balance between being both a competitor and a supplier to the market, he says.
There are, however, many who have criticised Telkom for its dual role. One example is lawyer and telecoms consultant, Michael Silber, who spoke on the subject at a seminar hosted by Stein Scop on 31 October.
In his presentation, Silber noted that Telkom`s dual role disadvantages other telecoms companies, which have to compete with a Telkom business unit that receives preferential treatment by virtue of being part of the supplier.
Silber suggested that a solution might be to break up Telkom into independent business units. The supplier would then be able to treat the value adding solution provider just as it would any other customer. He noted that this would level the playing field fairly for other telecoms companies.
No benefits for users
"Telkom, as usual, has made huge profits at the expense of the consumer," says Communication Users Association of SA spokesperson Ray Webber.
Webber accuses the fixed line operator of abusing its position as a monopoly, by not only making huge profits but also consistently increasing them. And yet, when the issue of the price of telecoms is discussed, "they remain unreasonable".
The ADSL pricing structure, which has been fiercely debated by various stakeholders, is cited by Webber as an example of Telkom`s "unreasonable" attitude on the pricing issue.
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