Contrary to expectation, Telkom SA executives did not make any reference to future numbers when the company presented on its prior fixed-line capital expenditure and network investments at a workshop in Sandton today.
Spokesman Hans van de Groenendal said the intention with the presentation was merely to detail existing infrastructure and technologies to the investment community, and not to go beyond statements in Telkom`s latest prospectus, other than to clarify its complicated technical detail and detail its new financial reporting structure. "Future numbers will be made available at the end of the financial year, around 23 June," he said.
The workshop included presentations by Telkom`s CTO, Reuben September; Access Networks Operations managing executive, Theo Hess; and Operations Support Systems (OSS) managing executive, Johan Mare. The three men provided additional disclosure on prior years` capex as Telkom moves away from licence obligation disclosure and into management reporting.
Capex was discussed under six new categories: baseline, network evolution, cost savings, revenue generating, regulatory and company support, while the old categories included OSS, line roll-out, network modernisation and company support.
In the year ended 31 March 2002, fixed-line capex totalled R6.9 billion. Of this, 40% (R2.7 billion) was baseline expenditure. Cost savings formed 25%, network evolution 27% and company support 7% (down from 9%).
"Baseline capex was largely driven by Telkom`s line roll-out programme, mobile leased facilities, data leased-lines and to a lesser extent, by business solutions growth," the company says. "Baseline capex is also focused on bandwidth provisioning in the access network (eg through ADSL and specialised radio local loop applications) and the expansion of the IP network for the provision of customer-specific value-added IP solutions."
Telkom has also historically invested significantly in evolving its transmission, switching and access networks, and significant capital expenditure has been aimed at reducing costs, improving effectiveness and enabling better service. Current network evolution capital expenditure is focused on the deployment of Dense Wave Division Multiplexing in the transmission network and integrated access devices.
Cost-reduction and efficiency-improvement investments include those in OSS, network management, IT business systems, management systems and centralisation.
"Telkom has enhanced its capital management process to improve capital efficiency through strict capital project approval processes and the utilisation of existing infrastructure and spare network capacity to drive down investment in new line growth. We also have enhanced benefit tracking and reporting processes for our capital programmes, and are benchmarking our network roll-out costs against industry standards as we focus on reducing capital expenditure as a percentage of revenues," said September.
Telkom`s previous network investment strategy had focused on meeting licence obligations including the roll-out of lines to underserviced areas and the modernisation of the network.
"By contrast, our current network investment strategy focuses on increasing network efficiencies, lowering costs and exploiting market opportunities. Our overall objective is to achieve satisfactory rates of return on our network," said September.
The full presentation can be found here.
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