Telkom revenues take a knock

November 22, 2010 6:43 pm 0 comments

Telkom says it is still reeling from the sale of its stake in Vodacom and the impairment it suffered from its struggling Multi-Links arm as its latest results reveal drops in its operating revenue and plummeting returns from its voice services.

Acting group CEO, Jeffrey Hedberg, conceded to the operators poor performance, saying the six months under review had been challenging.

“Telkom’s results for the six months ended 30 September 2010 paint a picture of an organisation under pressure with revenue down 5.4% to R17.6 billion; EBITDA down 0.6% to R5.1billion and profit from continuing operations down 9.3% to R1.4 billion,” Hedberg explained.

The operators group interim results for the past six months revealed that a decrease in its normalised operating revenue by 5.4% to R17.6 billion. While data revenue increased by 14.9% to R5.6 billion – voice revenue decreased dramatically by 19.1% to R6.9 billion.

ADSL subscribers also declined by 16%, while fixed line W-CDMA subscribers declined by 177.7%. The operator’s fixed line penetration rate also declined, while total fixed-line traffic declined by 10.7%.

In its statement, the operator also noted that its results were materially impacted by the accounting for the sale and unbundling of its 50% Vodacom stake and related transactions and the impairment it suffered from Multi-Links.

“It is essential to stabilise the business, which we are doing through exiting the CDMA business in Nigeria and focusing iWayAfrica mainly on corporate customers. This allows us to allocate capital to those areas that will drive revenue growth and promote cost efficiencies,” Hedberg explained.

Increasing competitiveness

Hedberg highlighted five focus areas, saying interventions would improve the operators financial performance.

Interventions would focus on deliverable decisions in the organisation and leadership enforcing accountability; taking advantage of the network built for the 2010 FIFA World Cup by driving convergence and bundling; exiting the CDMA business by cutting ties with Multi-Links; improving cash flow and its EBITDA through efficient allocation of capital, innovation and commitment to cost efficiencies.

“The South African telecommunications industry is becoming more competitive and the regulatory environment continues to pose challenges to all operators. It is imperative that Telkom changes the way it operates in order to defend its revenue and grow into new revenue streams.

This is an enormous task given the complexity of Telkom’s systems, networks and human resources. In addition Telkom has to deal with significant management changes. These dynamics create an excellent opportunity for new management to stabilise the business and then execute on its plan to improve the financial performance of the Telkom,” Hedberg stated.

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