Openserve, BCX remain a challenge for Telkom group

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 09 Feb 2021
Althon Beukes, Openserve CEO.
Althon Beukes, Openserve CEO.

Openserve, Telkom’s wholesale business unit, remained under pressure in the last nine months that ended December, despite increased need for data in the period.

Adding to the operational pressure, Openserve is facing supply chain challenges, which Telkom says are a result of the international lockdown and are consequently disrupting the business.

Telkom released its financial results for the nine months ended 31 December 2020, which showed robust mobile growth but cautioned that “the pressure in the Openserve performance trends witnessed in the first half of the year continued in the third quarter of the year with year-to-date revenue down 12% to R10 233 million”.

In the previous corresponding period, Openserve revenue stood at R11 626 million.

Openserve has been beset by operational issues in the past few months, including vandalism and theft of infrastructure, and mass retrenchment, which saw the company become one of the hardest hit by the job cuts in the telecoms sector.

At the time, Telkom said Openserve’s network modernisation from copper to fibre meant many technicians had to go, as fibre has fewer faults in comparison to the legacy copper network.

The company also became a target of vandals and cable thieves who stripped infrastructure during the nation-wide COVID-19 lockdown.

Althon Beukes, Openserve CEO, lamented the destruction of infrastructure, saying: “Cable theft diverts the resources – manpower and funding to repair and replace – from enabling the additional required connectivity and capacity to now wasting time and resources to deal with the cable theft.”

However, yesterday Telkom said, while the pressure continues on the company, it wasn’t all gloomy for Openserve.

“While we saw an increased need for data in the period, fixed voice usage continued to decline, therefore Openserve’s performance remains under pressure. The investment in the network has enabled it to carry increased traffic of 28% across its fixed-line network,” Telkom said.

“We saw an increase in demand for fixed connectivity resulting in an improved FTTH [fibre-to-the-home] connectivity to 56.7% compared to 46.6% in the prior period. Whilst we were faced with supply chain challenges resulting from the international lockdown in the third quarter, we have continued to drive the expansion of our fibre footprint, as evidenced by more than 25 000 new homes passed with fibre in the period.”

Openserve was not the only Telkom unit that faced challenges in the nine months.

BCX’s performance remained under pressure, which Telkom said was a result of the overall market environment being challenging, albeit with some economic recovery.

In the period, BCX’s revenue was down 9% to R11.8 billion from R13 billion during the previous corresponding period.

Telkom said: “The year-to-date decline in revenue is lower than the revenue decline reported in the first half of the year, as we saw a slight recovery in the South African economy in the third quarter. COVID-19 is an ongoing risk and management is driving initiatives to mitigate the risk.

“Management maintains an annuity revenue mix of between 70-75%, which has cushioned our revenue decline during the pandemic. To mitigate the impact of revenue decline in profitability, BCX focused on driving cost-efficiencies. The cost-efficiencies resulted in improved year-to-date EBITDA compared to the first half of the year.”