Telkom to grow into IT, partner with government

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FIXED-LINE operator Telkom, which has embarked on a turnaround strategy that boosted its market capitalisation from R10 billion in last year to R26bn this year, is going in guns blazing to usurp a significant share of the market from other players in the sector.

The firm has implemented cost restructuring to help it save as much as R17bn of its supplier spend. The goal is to stabilise pressurised revenue margins to achieve growth and higher profitability levels.

According to a presentation prepared by Brian Armstrong, the chief operating officer at Telkom, at the company’s investor day conference in Centurion on Friday, the company aimed at growing its margin of earnings before interest, taxes, depreciation and amortisation between 26 percent and 27 percent next year, and between 27 percent and 28 percent in 2016.

As the company embarked on optimising its shareholder value, he said, it would also look at ways to strengthen free cash flow and normalise capital expenditure to revenue in line with benchmark and peers at between 14 percent and 17 percent.

Armstrong said Telkom’s retail strategy would entail developing a go-to market and solutions capability for large corporate and government business.

It would also expand into adjacent information technology (IT) markets through organic growth, partnerships and acquisitions, as well as improve the company’s offer to small and medium enterprises with lower-cost products, simple bundled solutions and better targeted channels to the market.

“We will establish ourselves as the government’s lead partner for the provision of services and e-platforms. We will also migrate our business customers to fibre-based products and rationalise our product portfolio and archive sustainability in mobile services to the business market,” he said.

Armstrong said another core aim would be to ensure that the majority of non-DSL services converted to fibre by 2018. Page 17

 

Amplats

Phuti Mahanyele, the chief executive of the Shanduka Group, a JSE-listed black investment company, made headlines yesterday when she called on buyers of Anglo American Platinum (Amplats) assets to coexist with labour unions rather than mechanise the operations.

Amplats said last month that it would sell four mines and possibly stakes in two joint ventures after first-half profit fell 88 percent because of a five-month strike.

Mechanised mines require less labour, are cost effective and are becoming a popular choice among mining houses.

It comes as no surprise that Amplats, the world’s top platinum producer, will focus on its mechanised operations in Limpopo where it planned to spend up to R100 billion to capitalise them until 2024.

“Going the mechanised route is an aggressive approach,” Mahanyele said in an interview at the US-Africa Business Forum in Washington, Bloomberg reported. “We have to find ways to work with labour.”

Shanduka was founded by Deputy President Cyril Ramaphosa and owns stakes in platinum mines.

As a leader of an empowerment company, Mahanyele has a political agenda. She is sympathetic to the cause of mineworkers, but the reality is that labour unrest has eroded investor confidence in South Africa. Experts have even speculated that South Africa will likely lose out on investment opportunities to neighbouring countries including Zimbabwe.

Over the past two years, risk-averse investors have run out of patience after being hit by violent labour disruptions. Gold Fields is a case in point. The gold producer voted with its feet when it unbundled its ageing South African assets and established Sibanye Gold, following the violent strike in mid-August 2012.

Impala Platinum has previously said it might mechanise a future development to reduce its labour costs. Page 17

 

Edited by Peter DeIonno. With contributions from Ayanda Mdluli and Dineo Faku.


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