Telkom plays down likelihood of Cell C purchase, boasts

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Telkom has told investors that news it plans to purchase the assets of Cell C have been overplayed in the press, and that while it is currently undergoing due diligence on a potential acquisition it has not factored it into forward plans and will only move forward if everything makes sense for the company.

“We’re having a look, and if all the parameters are right and the price is right it’s something we’d do,” Telkom CEO Sipho Maseko told an audience of analysts and journalists at the firm’s interim results briefing this morning, “But we won’t be reckless. We did the due diligence so we could get in and have a good look and make sure that the parameters we’ve set for ourselves around the future growth and particularly spectrum allocation [are there, but] we are not committed to an irreversible path. It will swing on what we find and what value we attribute to that and I can assure you we’re very prudent around that.”

Citing Telkom’s own financial and labour related woes which the firm has spent the best part of two years tackling, Maseko added “We’re not going to flick a switch and undo all the work the team has done.”

Chief financial officer, Deon Fredericks, was critical of news reports that made a purchase seem inevitable.

Telkom’s six month interim results for the period ending 30 September show that more South Africans favour mobile internet connectivity options over fixed line solutions. And also more honest about Telkom’s own recent history.

“Comments in the press over Cell C are a “rewashed” version of Sipho’s comment earlier in the year that we would be interested at the right price,” Fredericks said, “We’re not going to buy something that’s broken and beyond repair. We’ve had that experience already.”

In its filings today, the telecommunications company says that it has seen an increase in operating revenue compared to the same period last year. This growth comes as a result of a 69% increase in mobile data sales and R1.2 billion revenue increase in mobile service and subscription revenue.

Telkom customers 2014 to 2015.
Telkom customers 2014 to 2015.

In addition, enterprise sales are up on the period, and while overall profits are down from a billion rand this time last year to just R606m, the vast bulk of this is due to costs incurred as a result of its R1.5bn settlement with unions around staff restructuring and layoffs – a process which Maseko says should be finished around Easter time next year.

The troubling marks in Telkom’s accounts are, unsurprisingly, that fixed line voice revenue has dropped by 3% compared to the same time last year and that data connectivity also suffered a knock as more competitors source their infrastructure from other suppliers, this saw revenue drop by 5%.

Fredericks says the rapid growth in mobile sales has offset the former issue, and that the firm has learned from its mistakes with slow fibre delivery in the past.

“In one area where we weren’t aggressive [We presume Fredericks is referring to Parkhurst – Ed],” Fredericks said, “We lost 70% of our customers. You have to be aggressive or you lose.”

Maseko claims that Telkom’s goal is to “win” the fibre to the home (FTTH) space. Currently, some 38 000 households have access to FTTH services, while over a million have VDSL services of up to 40Mbps thanks to fibre to the cabinet (FTTC) deployments across the country.

Telkom revenue by sector, 2014-2015.
Telkom revenue by sector, 2014-2015.

On the back of an improving mobile business Telkom hopes to break even with its mobile business by the end of this year.

The acquisition of Business Connexion has earned Telkom an additional R489 million while Trudon earned the firm R2 million compared to 2014. Swiftnet however has lost the firm R30 million.

Overall, Telkom’s total operating revenue increased from R15 911 million to R16 782 million despite retrenchments and retirements costing the company R1.5 billion.

[Image by CC 2.0 – stratman² (2 many pix!)]

Brendyn Lotz

Brendyn Lotz

Brendyn Lotz writes news, reviews, and opinion pieces for Hypertext. His interests include SMEs, innovation on the African continent, cybersecurity, blockchain, games, geek culture and YouTube.