Telkom to focus on Nigerian unit

By Nicola Mawson for Telkom

Johannesburg, 23 Jun 2009

Telkom's African growth plan, through subsidiary Multi-Links, has become a focus area after the wholly-owned unit made a loss in the year to March.

Multi-Links is part of Telkom's geographic expansion strategy, which aims to establish it as a “regional voice and data player through the provisioning of a range of hosting services, managed solutions, mobile voice and wireless broadband services”. So far, it has invested in Multi-Links, Africa Online and M-Web Africa.

CEO Reuben September says Multi-Links increased revenue 124.9%, to R1.9 billion, and subscribers increased 209.3%, to 2.5 million. The unit, however, made a loss of R1.76 billion, compared with last year's profit of R33 million. During the year, Telkom increased its stake in the Nigerian company to 100%.

The loss was off the back of operating expenses increasing 175.1%, to R2.4 billion, as a result of aggressive acquisition of customers, a high percentage of off-net calls, operating losses of R226 million and finance charges of R1.2 billion. The unit also incurred a foreign exchange loss of R902 million.

Recovery strategy

To turn Multi-Links around, it will increase its focus on wholesale, corporate, and small and medium enterprise markets. It also aims to grow revenue from fixed-wireless and mobile customers through brand awareness and promotion.

Multi-Links will also expand broadband Internet to offer high-value bundles, deploy metro Ethernet service to attract high-end corporate customers, and implement carrier-class corporate and wholesale product and service offerings, says September.

Average revenue per user, which declined from $32 to $9 during the year, has been targeted at $10 for the next year. Multi-Links has 640 base stations, 3 711km of fibre and access to an additional 2 000km through swapping and is deployed in 22 states and Abuja.

Telkom wants Multi-Links to be operating profitably in the 2010/11 financial year, and cash positive the year after that. It aims to add over 300 000 subscribers in the next year to its base of 2.5 million subscribers, says September.

Telkom says $100 million will be spent to boost capacity during the year as more fibre is rolled out.