Telkom 'profits at our expense`

Johannesburg, 18 Jun 2004

Government and the telecommunications regulator need to look more closely at the telecommunications market and take a more active role in administering and regulating prices, says the Communications Users Association of SA (CUASA).

Ordinary South Africans and business lose when Telkom makes "obscene profits", says CUASA spokesman Ray Webber.

Last week Telkom reported a 175% increase in headline earnings per share for the year to 31 March. Operating revenue rose by 8.8% from R37.51 billion to R40.8 billion. It declared a final dividend of 110c a share.

"Although we sympathise with the regulatory body, ICASA (Independent Communications Authority of SA), we can only assume that strong revenue growth from the monopoly means that there is profound failure on behalf of the regulator and government to curb overpricing and what can only be described as rampant profiteering," says Webber.

"Time and again, independent analysts and economists comment that SA could be winning major international call centre, other telecommunications and Internet-based contracts, but that such efforts are hampered by our extremely high cost of telecommunications and related services.

"In short, Telkom may well be delivering handsome profits to its shareholders, but in the process, the continuing monopoly is restricting business growth and denying South Africans employment opportunities."

Webber says that normally when a South African company was doing so well it would be welcomed, but the fact that Telkom operates in a largely non-competitive environment makes it likely that its fortune is derived from overpricing, self-protection and cross-subsidisation strategies.

"It`s all great news for Telkom and its shareholders, but it is a massive financial burden for ordinary Telkom clients, business and the South African economy in general," he says.

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