Telkom, SA's largest fixed-line operator, is moving its capital expenditure to focus areas and will cease to spend on business units that bleed cash.
Telkom yesterday released its results for the six months to September and indicated it will only invest in areas that provide customer solutions, generate cash and bolster profit.
In the first six months of the year, the company saw revenue decrease 5.4%, to R17.6 billion, and profit from continuing operations was down 9.3%, to R1.4 billion. The company spent a total of R2.165 billion on capital items, a 21.6% decrease on a year ago.
The bulk of its capital spend went into Telkom SA, where the company spent R1.9 billion, a 0.6% decline year-on-year. Telkom's mobile arm, 8ta, cost the telco R616 million in capital spend.
Acting CFO Deon Fredericks says capital spend, taking into account the investment in 8ta, amounted to 12.4% of revenue, a decline on the 14.8% a year ago. Looking ahead, Fredericks expects capital spend to come in at the lower end of between 20% and 25% of revenue.
Priority spend
Acting CEO Jeffrey Hedberg, presiding over his first results announcement since taking over from Reuben September, says Telkom has identified areas where customer demand requires investment in the network.
Hedberg explains there is a hunger for faster Internet connectivity, and Telkom will spend to ensure its networks can handle more throughput.
Telkom spent R148 million on its access network during the first six months of the year, 29.9% less than a year ago. It also spent R356 million on its next generation IP-based network, a 41.3% decline on what it spent a year ago.
Multi-Links, its troubled Nigerian operation, saw 77.7% less capital spend as Telkom froze investment in the CDMA unit. Hedberg says unless the company is required to spend, no more investment will be made into CDMA in Nigeria.
Telkom is in talks to dispose of Multi-Links' CDMA unit and expects to wrap up the sale in the next two quarters.
Share