The COVID-19 nation-wide lockdown has had a positive impact on Telkom’s balance sheet, with the company announcing it has reduced costs on its retrenchment exercise by R300 million.
Telkom’s cost of the restructuring process was initially pegged at approximately R1.5 billion, but now the company says it has reduced this to almost R1.2 billion, as a result of the postponement of the retrenchments in light of the COVID-19 lockdown.
In a note to shareholders, Telkom says preserving cash and maintaining a flexible balance has become of utmost importance and urgent during the COVID-19 pandemic as the economy is under strain.
In January, Telkom announced 3 000 jobs will be cut. This was not the first it had reduced staff numbers, as it has been offering voluntary retrenchment packages since 2015, in a bid to reduce its wage bill.
In May last year, Telkom said it cut over 2 000 jobs in 2018 and reduced permanent staff by 12.5%.
Telkom’s total permanent group workforce at the end of March 2019 was 15 296, compared to 17 472 at the end of March 2018, a reduction of 2 176 jobs in one year.
On Tuesday, Telkom told shareholders that cash outflow relating to the restructuring process and the tax matter before the courts will be funded out of cash balances, including a liquidation of the short-term investment, resulting in not raising additional debt.
Delayed results
In the same update to shareholders, Telkom also revealed it will not finalise annual results on time, as initially planned.
“The institution of the lockdown has impeded the company’s ability to complete the necessary work required to finalise the annual results by 25 May 2020, and accordingly, the board of directors considers it prudent and in the best interests of the company to utilise the two-month extension period.
“Given that the company’s financial year end is 31 March 2020, the company will issue its annual results on 22 June 2020, and the integrated report incorporating the full annual financial statements and the notice of annual general meeting on 7 August 2020,” it says.
However, Telkom says it has proactively designed and implemented measures that will mitigate against “the COVID-19, focusing on the well-being and safety of employees, continuity of supply and service to customers, supply chain, infrastructure and network, IT and security, and liquidity”.
“Telkom’s number one priority is the health and safety of its employees, with approximately 80% of our employees having been empowered to work from home, while our frontline staff and field service technicians continue to serve customers.”
Supporting govt efforts
SA has been in lockdown since 26 March; however, government last week peeled back some restrictions, which has seen a significant number of businesses resume trading.
Telkom said it is in agreement with the government on its efforts to fight COVID-19 and also supports government initiatives to curb the spread of the virus.
The company has partnered with the National Institute for Communicable Diseases to develop a track and trace tool for COVID-19, zero-rated some educational content, and created a disaster fund supporting the Red Cross for frontline healthcare workers as well as mobilising the public to contribute.
Turning to its performance, the firm says: “During the lockdown, Telkom has seen a surge in fixed and mobile network traffic for our telco services from people working from home. Telkom has a scalable network and enough redundancy to manage the increase in demand.
“The significant investments made in modernising the network, including fibre backhaul, enabled us to carry more traffic on our network, giving us the resilience of our network to support this increase.
“Telkom’s mobile footprint capacity has been improved with new sites and increased radio capacity on existing sites. The assignment of additional spectrum, on a temporary basis, will enable us to alleviate congestion in identified sites.”
The telco also cautioned its shareholders that it is not entirely safe from the damaging effects of COVID-19, as its portfolio of businesses is exposed to all sectors of the economy, including the sectors that are in distress.
“The extent of the lockdown and the effect of COVID-19 across our businesses is being assessed and business continuity plans are revised and executed accordingly.”
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