Recruiting, rebranding, refining and reducing costs within SA's largest and most pivotal telecommunications company have put Telkom in the spotlight over the past few months - but what does the sudden action amount to?
Recent developments at Telkom have had industry observers speculating as to what the future holds for SA's beleaguered telecoms giant. Analysts say the latest changes may bode a bright future for the company - providing government can turn dithering into decisiveness and finally provide clarity on what Telkom's chief stakeholder envisages for its future in the market.
One of the most dramatic catalysts for true transformation and sustainability of Telkom, say analysts, is the notion of an equity partner that will provide both financial backing and expertise. The introduction of a new partner, however, rests largely in the hands of government, which has a majority stake in the company.
The industry has been waiting for an announcement from the Department of Communications (DOC) regarding the strategic direction Telkom should take, for months now, but communications minister Dina Pule has yet to publicise the outcome of meetings with the company's board.
Indian element
Ovum analyst Richard Hurst recently suggested that a strategic equity partner for Telkom is likely to be announced in the near future. Hurst went on to say the partner could well be "someone from the Indian subcontinent".
Dobek Pater, analyst at Africa Analysis, says while developments on this front are not public, there may be goings-on "behind the scenes". If so, he says, the new partner would likely be government-driven rather than Telkom-driven, especially if from India.
"We have seen two 'recent' cases of Indian involvement in African telecoms service providers on a large scale over the past several years. One is Neotel. Only recently has the company begun to show positive results, after a management change-out. The other is Bharti Airtel, which followed an 'Indian' strategy in African markets after its acquisition of Zain assets, which has resulted in very poor company performance. It has now changed its strategy."
Dobek says the Indian telecoms market has little in common with the South African market. "About the only thing in common is that both countries belong to BRICS."
He says, however, from a strategic perspective, Bharti Airtel could possibly want to invest in Telkom with the view of using Telkom as a driver for the development of fixed-line/Internet service provider operations in its various African operating companies, and as a continental service provider.
World Wide Worx MD Arthur Goldstuck says, while talk of an equity partner originating from India is speculative, "someone like Bharti Airtel could be a great partner for targeting the mass market in the mobile sector". Having said that, Goldstuck notes that an equity partner in whatever capacity would not in its own right be the complete solution for Telkom. "But it would certainly be part of it."
Government's hand
Analysts maintain the success of Telkom and a turnaround that will see it land - and stay - on its feet hinges largely on government and its pending decision regarding Telkom's strategic direction.
Government holds a 39.7% direct stake in Telkom and another 10.6% indirect interest though the state-owned Public Investment Corporation.
The state has repeatedly been accused of interfering with the running of Telkom. Goldstuck points out that Telkom's board has been outspoken about government interference. "I think there is a realisation of the damage the minister [of communications] has created over the past year."
Goldstuck says government's canning of a potential deal with Korea-based KT Corporation last year set Telkom back by 12 to 18 months.
Pater says Telkom should have learnt its lesson from the last attempt at a partner, and any foreign investor in Telkom would already come with the government's tacit approval prior to negotiations taking place, or would be recommended by the government itself. "However, the government tends to be schizophrenic, as we saw last time. The DOC gave Telkom its blessing, but the Cabinet rejected the deal. Hopefully, the DOC/government will do its homework more diligently next time and agree on certain things upfront before proceeding."
He says, while recent interim action by Telkom does signal a new beginning for the company, he will withhold judgement on the brightness of its future, until such time as government announces what plans it has in store for Telkom.
Goldstuck says, with government posing the ever-present stumbling block to Telkom's operations, it is hard to tell at this stage whether the industry can expect blue skies ahead for the company. "It is not about what actions have been taken or decisions made up until now, but rather what is to come.
"A lot depends on if government will allow Telkom to become something greater than it is."
The DOC had not responded to queries by the time of publication.
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