Telkom's efforts to restore its financial sustainability are starting to pay off and the group anticipates being in a position to start paying dividends again next year.
The organisation, which is in the middle of a potential retrenchment process, this morning said it had turned over R32.5 billion in the year to March, a slight gain on the R32.1 billion reported a year ago. However, its bottom line was vastly improved, thanks to a series of cost cuts and once-off costs.
Telkom is targeting profitable revenue growth as it has been battling financially as revenue from its fixed-line business continues to dwindle. For the full year, voice income from landlines and interconnection dropped 7.4% to R9.4 billion. While fixed-line data revenue decreased 1.1% to R10.3 billion, mobile revenue increased 72.7% to R2.3 billion, its results show.
Paying off
Despite the continued pressure on its traditional mainstay, CEO Sipho Maseko says efforts to turn the company around are "starting to produce results". Headline earnings per share from continuing operations - stripping out once-offs - came in 35.1% higher than in 2013, at 388c.
However, Maseko notes its revenue growth of 1.1% confirms "we still face significant challenges largely as a result of the sustained pressure on our fixed-line revenues". Operating expenses, a key focus for the group, dropped 2.1% to R18.2 billion.
This, says Maseko, is a "commendable achievement when you consider that in real terms this translates to an 8.2% reduction in operating expenses". The reduction is thanks to lower staff costs, less bad debt and cost-efficiencies, he notes.
"We began to realise some significant efficiencies in our third-party spend by improving our facilities management, and rationalising our property portfolio."
Challenges remain
Maseko adds pressure on voice revenue will continue, and the group also faces strong competition, a challenging macro-economic environment and effects of regulatory interventions. He says its aim of stabilising revenue depends on "effectively positioning our resources to drive value and achieving efficiencies across our operating cost base".
Telkom will have to focus its capital expenditure on areas that generate satisfactory returns, says Maseko. During the year, Telkom spent R6.5 billion on capital items and expects to invest between 14% and 17% of its revenue each year until 2016.
The company has also sought to de-risk its mobile business by entering into a deal with MTN that will allow both operators to roam on each other's' networks. Maseko hopes to wrap up this agreement by next March.
Telkom also wants to complete its proposed R2.67 billion buyout of Business Connexion (BCX) before the end of the new financial year, says Maseko. However, talks have been put on ice for a while following BCX CEO Benjamin Mophatlane's sudden death on Wednesday.
Telkom's bid aims to expand its IT services offering and also help BCX expand further into Africa. Maseko says both deals should enable Telkom to "rapidly fill gaps in our service and product offering, which we believe will improve Telkom's competitiveness, profitability and ability to provide fully converged solutions to our customers".
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