BCX restructuring gaining traction, says Telkom

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Sipho Maseko, Telkom Group CEO.
Sipho Maseko, Telkom Group CEO.

Telkom is happy with the progress its subsidiary BCX is making to arrest declining financial performance.

This emerged from Telkom’s integrated report for the year ended 31 March 2019 that the company published this morning.

In its results earlier this year, Telkom indicated that BCX’s revenue improved from a R1 billion revenue decline in the prior year to a revenue decline of R683 million.

BCX, formerly Business Connexion, has taken a different business approach since it was acquired by Telkom in 2015 in a R2.67 billion deal.

The acquisition saw co-founder Isaac Mophatlane leaving the company in 2017. He was replaced by Ian Russell, who was then group chief transition officer. Jonas Bogoshi replaced Russell as CEO in June last year.

The IT services company has been a problem for Telkom because of its poor financial performance.

Last year, BCX commenced a restructuring process which resulted in the retrenchment of employees.

In its integrated report, Telkom says BCX has gone through a restructuring process with an aim to stabilise the business by arresting the declining financial performance, simplifying the structure to create efficiencies and reducing the organisation’s cost to serve.

According to the telecommunications company, the restructuring process is gaining traction as evidenced by better financial performance in the second half of the year where the rate of decline in revenue improved to 1.8% compared to a 4.9% decline in the first half of the year, and earnings before interest, tax, depreciation and amortisation increased by 46% compared to a decline of 36.5% in the first half of the year.

It points out that performance overview revenue declined 3.4% to R19 580 million, a decline of R683 million compared to a R1 billion revenue decline in the prior year.

Telkom says the decline in revenue is primarily due to a 13.3% decline in fixed voice revenue, a deteriorated performance from small and medium business and continued delays in spending from the public sector.

In the prior year, BCX initiated a review of its business portfolio identifying some of the African subsidiaries as assets held for sale and integrating South African subsidiaries into One BCX to drive efficiencies within the company.

To this end, BCX Nigeria, Tanzania and SOX group are held for sale. The remaining international subsidiaries are retained to have presence across borders. The integration of the South African subsidiaries into One BCX is progressing according to plan, and two subsidiaries will be divisionalised in FY2020, says Telkom.

“BCX has stabilised as an organisation, although it is not where we hoped it would be by this time,” says Sipho Maseko, Telkom’s group CEO.

“We had to overcome BCX and Telkom business integration challenges and enhance leadership intensity to what is required, while being constrained by the conditions imposed by the Competition Commission. We had to focus on balancing rapidly declining legacy revenues with slower growth in new technology revenues.”

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