Telkom turnaround begins to bear fruit

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Johannesburg - Telkom released solid year-end results ahead of announcing major plans to roll out Fibre to the Home connectivity to more than 20 suburbs before the end of the year and to deliver high-speed home LTE connectivity to a host of others across the country.

For the year to March, it showed profit after tax from continuing operations of R1.577 billion from R1.494bn previously. Operating revenue increased by 1.1 percent to R32.5bn, signalling a healthier balance sheet than in past years.

Telkom posted a 35.1 percent increase in headline earnings a share from continuing operations to R3.88, while basic earnings a share increased to R2.852 from R2.685 the previous year.

Sipho Maseko, the chief executive, said efforts to turn the company around were bearing fruit.

“We have managed to stabilise revenues through significant once-off items, which were carefully considered and form part of our strategic imperative to turn around the business and generate sustainable revenues.

“In line with our guidance to stabilise revenues, we achieved revenue growth of 1.1 percent for the year, confirming that we still face significant challenges, largely as a result of the continued pressure on voice revenue, resulting from fixed-to-mobile substitution. We recorded promising growth of 80.2 percent in mobile data revenue and 69.3 percent in IT business services revenue.”

Maseko added that the group aimed to conclude the proposed MTN South Africa and Business Connexion transactions within the financial year, despite fears that the latter might encounter difficulties after the death of Benjamin Mophatlane, the chief executive of Business Connexion, last week.

Maseko said there was demand for quality and high-speed internet connectivity. “Our commitment to deliver this roll-out by the end of the calendar year indicates our efforts to put our customers’ needs at the heart of our strategy. The quality of connectivity that fibre and LTE provide means that South Africans can take advantage of the possibilities that access to the internet can provide.

“This roll-out is a precursor to many exciting prospects that Telkom is working towards. With speeds of 100Mbps on the fibre network and peak speeds of 100Mbps on the home LTE network, the concept of the connected home becomes more tangible. The possibility of value-added services is in reach.”

However, according to TechCentral website, Telkom wasted billions of rand on misadventures in Africa and the fibre-to-home infrastructure was long overdue because the telecoms giant would face stiff competition in the current market.

Telkom managed to slash operating costs by 2.1 percent, a feat achieved by lowering employee costs, reducing bad debts through improved credit vetting, and improving efficiencies by cost management.

Free cash flow remained strong at R1.2bn, after capital investment of R6.5bn, which increased 12 percent. The company said this was due to a substantial investment in the upgrade of the group’s network.

“Our objective to further stabilise and grow revenue depends on effectively positioning our resources to drive value and achieve efficiencies across our operating cost base. This will require us to focus our capital expenditure on areas that generate satisfactory returns for our shareholders, and avoid unprofitable operations,” said Maseko.

The shares rose 1.16 percent to close at R42.63 on Friday. - Business Report



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