Telkom transforms to attack

Kimberly Guest
By Kimberly Guest, ITWeb contributor
Johannesburg, 31 Mar 2008

Telkom CEO Reuben September says the group is embarking on a transformation strategy which will see it "moving away from acting like a parastatal".

Speaking this morning at the company`s Analysts` Day, September reiterated that Telkom`s core strategy remained defending and growing profitable revenue.

Telkom has been discussing its defend and growth strategy for some time now. In the face of increasing competition it has said that it needs to find ways to reduce declining voice revenues, while branching out into new areas which will make up for that revenue lost in an evolving telecommunications landscape. This strategy was sited in its R30 billion infrastructure expansion project in 2006.

This morning however, September revealed the company had identified five areas where transformation would be introduced.

"This is nothing short of an emphatic change in the company," said September. "We are moving away from acting like a parastatal to being a company out there, attacking the market. In terms of our business acumen, we will no longer operate in silos, but as a group."

Acknowledging the group had left much of its network to go neglected, September said its strategy would move its network from "vulnerable to excellence". As for its network evolution from legacy voice to IP converged, September said the group had already seen value in many respects from its infrastructure investment.

Defend, attack

As for Telkom`s defend and grow strategy, September said it remained "on track" and the board believed the company was making headway.

"On the defend side, we are making progress in converting our revenue to annuity income through initiatives around bundling and annuity. In terms of retention, we are introducing a portfolio management system which will help us to determine the maximum value we can extract on each customer. This will also help us on the customer loyalty drive as we aim to appeal to our customers on an emotional and rational level. We want customers to choose to deal with us on their own," he said.

On the other side of the coin, Telkom`s growth strategy takes into account its need to replace declining revenue due to market share losses, pricing pressure and economic pressure on average revenue per user (ARPU).

"We have conducted an external environmental analysis which has identified several opportunities in fixed-mobile growth, geographic expansion, converged solutions, rich media over broadband for the consumer market, and network, data centre and IT solutions. We fully intend to exploit these opportunities," commented September.

However, September stressed that Telkom`s acquisition strategy would not be a case of buying simply for the sake of growth.

"We are working towards establishing Telkom as a managed service provider. Purchases must meet this aim."

By lunch time Telkom`s share price had declined 8.23% to R133.99 per share.