Telkom to slash R17bn supplier bill

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TelkomW Independent Newspapers. A Telkom advert. Photo: Leon Nicholas.

Johannesburg - Telkom, South Africa’s biggest landline carrier, plans to reduce procurement costs by “as much as possible” over a three-year period after paying more than half its revenue to suppliers last year.

Telkom had about 2,400 suppliers in the year through March, with 23 sharing 80 percent of the 17 billion rand outlay, chief procurement officer Ian Russell told investors today, according to a presentation on Telkom’s website.

The Pretoria-based company reported revenue of 32.5 billion rand in the period.

Pynee Chetty, a spokesman for Telkom, didn’t immediately respond to a voice message left on his mobile phone and an e-mail seeking further comments on how the cost cuts would be made.

Telkom is battling to reduce costs to offset a decline in landline usage, increased operating expenses, and performance below that of competitors, chief executive Sipho Maseko said in a separate presentation to investors.

The shares gained 4 percent to 52 rand by the close in Johannesburg, the highest in more than five years.

The stock is the second-best performer on the FTSE/JSE Africa Index this year, gaining 86 percent.

Telkom plans to reduce property-related costs of more than 2 billion rand last year and may sell part of its portfolio, Russell said.

Procurement must be “fair, equitable, transparent, competitive and cost-effective,” in line with South Africa’s Preferential Procurement Policy Framework Act, according to his presentation.

The company, which is about 40 percent owned by the government, awarded a 91.1 million-rand advisory contract to US consultants Bain & Co without an open bidding process, according to a document seen by Bloomberg News.

Telkom reported net income of 3.9 billion rand for the 12 months through March, snapping two years of losses.

The company has said it plans to make job cuts at management level.

The company is considering the sale of excess properties over the next two years, Russell said.

Telkom’s portfolio consists of 23 million square meters of land and 2.2 million square meters of buildings, of which it owns 77 percent. - Bloomberg News



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