Telkom CEO Serame Taukobong is planning to rebuild BCX, an ailing company in the group, which has continued to suffer losses in recent years.
Specifically, Taukobong says, Telkom is in discussion with an unnamed “strategic partner” that will give BCX the scale and capability to dominate the market.
Taukobong, the telephony group’s new chief executive, set out the latest attempt to revive BCX’s failing fortunes in an interview with ITWeb, during which he promised to rekindle a sense of pride in the company.
BCX, which offers ICT solutions such as analytics, cyber security and cloud services, was founded by Benjamin and Isaac Mophatlane in 1996, and was acquired by Telkom in 2015, in a deal valued at R2.6 billion.
In the past few years, BCX has been limping and remains under pressure, with Taukobong saying this is due to the lingering impact of the lockdown and the global supply chain constraints and shortage of semiconductor chips.
In the current reporting period, BCX’s revenue declined by 2.6%, a situation the CEO hopes his team will turn around soon.
He tells ITWeb “an interesting announcement” on BCX’s future will be made in the next two to three months.
“What we have seen with BCX is that in the second half of the year, it had better performance and recovery, even though revenue remained negative at 2.6%. What we are seeing is growth in the converged communications business; we have seen growth in cyber security, IOT solutions and innovation technology, albeit off a smaller base.
“I think what’s key for us for BCX is how we get a strategic partner, who can give us scale and capability. We are in the process of speaking to such partners, which will help us in strengthening our position in South Africa but also expand beyond SA’s borders.”
Taukobong declined to name the “strategic partner” at this stage, saying the announcement will be made in the next three months.
In addition to BCX, he intends to reawaken TelkomOne, a video-on-demand streaming service in SA, and boost airtime lending.
He says while TelkomONE’s contribution to the group is “relatively low”, he plans to see the unit contribute 3% to 5% of mobile revenue in the next two to four years.
Spectrum journey
Commenting on the recent spectrum auction, Taukobong says spectrum will soon help Telkom improve capex efficiency.
At the auction, Telkom acquired 20MHz of 8 000MHz and 22MHz of 3 500MHz for R2.1 billion.
The telephony group has since made a payment of R1.1 billion in the current financial year, with the remainder of the payment being due at a later date.
“Telkom will use the newly-acquired spectrum to support its strategy of building a data-led network. Given South Africa's dual economies, Telkom believes 4G and 5G will co-exist for some time and is expanding its network based on current data traffic and readiness for 5G deployment.
“Today, 93% of Telkom's data traffic is on a 4G network and 68% of Telkom Mobile sites use fibre backhaul, giving Telkom the edge for 5G deployment. The acquisition of 22MHz of 3 500MHz results in us securing a consolidated 50MHz of contiguous spectrum, giving us high spectral efficiency for optimal 5G deployment.”
Taukobong says Telkom recently signed a “pilot to look at a mine in Magaliesburg; we have been doing IOT and 5G in conjunction with the industry. We are also looking at various industry streams to develop 5G propositions for them.”
Furthermore, he addressed matters pertaining to the growing competition in the local telecoms space, saying consolidation is inevitable as it is “like a natural movement and trend for the market to go there”.
He explains: “If we look at our market, it’s not different to global trends. We have always said South Africa does suffer a strong duopoly in MTN and Vodacom; Cell C effectively lives on MTN and I think we are seeing consolidation in all sectors of the market. MTN sold towers to IHS; we are seeing consolidation in the fibre businesses.”
Taukobong is the latest industry heavyweight to add his perspective on industry consolidation, after MTN Group CEO Ralph Mupita recently said: “Having a market that is saturated by a number of players is not sustainable. There is simply not a big enough profit pool to meet the return and other financial objectives of a number of industry players.
“Within the next few years, we will see a sector dominated by two to three major players who have the capabilities and capacity to rally massive amounts of capital investment locally and abroad, to sustain the industry’s expansion.”
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