Telkom is seeking ways of "de-risking" its loss-making mobile unit, as it embarks on yet another initiative to cut costs.
The group, which has so far pumped billions into its mobile network, is seeking a way to continue to leverage mobile technology for future growth, while trimming capital spending on the unit. This morning, it said it would set a "prudent" R6.5 billion capital investment cap, while it investigated its options, especially for Telkom Mobile.
Telkom CEO Sipho Maseko this morning declined to provide more input around Telkom Mobile's future, saying the company would continue to be "opaque". He adds the group is in conversation with some partners around possible options.
The outcome of these talks will be announced at the right time, says Maseko. He notes the mobile operator will have less of an appetite for capital in the future.
The unit launched in October 2010 as 8ta, but has since been rebranded as Telkom Mobile. At launch, Telkom said it had set aside R6 billion to fund the network for five years, and it was only expected to become cash-generative in 2015.
However, Maseko says Telkom needs to find a way to get rid of risk in the unit, and to trim spending on its network. This will not be at the expense of its plans to be an integrated fixed and mobile player, he says.
During the first half of the year, total capital spending gained 49.5%, to R3.2 billion, of which R815 million went into its mobile operation.
Telkom's mobile unit is going through a difficult time and is not getting the expected traction, but Maseko is happy with management's response to the environment. Yet, he notes, it must improve average revenue per user, grow its customer base, and cut costs. "They need to literally walk and chew gum at the same time."
During the six months to September, Telkom Mobile grew turnover year-on-year to R926 million, from R596 million. However, its loss widened to R773 million, from R716 million.
Although revenue from the mobile operation gained 55.4%, mobile voice and subscriber revenue decreased 20.2% as the number of postpaid subscribers dropped, while spending by those subscribers also declined.
The unit has 1.6 million monthly active users, a slight gain from the 1.5 million it reported a year ago. Blended average revenue per user is R58.81.
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