Thursday, June 24, 2010

South Africa's Telkom Sets Sights on Mobile, CEO to Step Down

Citing a continued slide in traditional voice revenue and growing competition, Telkom, South Africa's incumbent operator, reasserted its plan of restructuring into three business units.

"Our strategy seeking to re-position the Telkom Group is imperative given the tough operating environment. Similar to the strategies of other leading operators in the world, we are focusing on growing other revenue streams -- data centre operation, mobile and Africa -- to compensate for the decline in fixed voice revenues. We are improving our execution in current growth markets, such as broadband and wholesale, and are taking actions to defend our consumer and enterprise markets," said Group CEO Reuben September.

Earlier this month, Reuben September announced his intention to retire from his position and resign his directorship at the expiry of his contract in November 2010.

Some operational notes for the 2010 financial year:

  • There was a 9.3% decrease in Telkom SA's voice traffic revenue.

  • Telkom is preparing to launch a mobile offering. A roaming agreement with MTN will cover services such as voice, 2G and 3G data, MMS and USSD on a national basis. Telkom will also offer a full international roaming agreement at launch. Initially, prepaid, post-paid and hybrid voice and data services will be offered and these will be provided by a unified 2G and 3G voice and data network.

  • Telkom has already ordered 2,000 base stations which are in the process of being constructed in the first year. The company plans to have 40% population coverage at launch which will be grown as required over five years. Full national coverage will be provided through the roaming agreement with MTN.

  • Telkom launched a new "cybernest" data centre operation in November 2009.

  • The new Telkom Management Services (TMS) has been created to provide consultancy services to telecommunications operators in Africa in order to improve their performance by providing network, IT, vendor and funding strategies, hands-on management and technical expertise best suited to meet their challenges.
    TMS is currently exploring opportunities in Malawi, Zimbabwe, the Democratic Republic of Congo, Liberia, Angola, Ghana, Uganda, Botswana, Namibia, Lesotho and Swaziland.

  • Telkom's capital expenditure was R5.4 billion for the year ended 31 March 2010. This was down 44.2% from the R9.6 billion spent in the 2009 financial year. As a result, normalized free cash flow improved significantly to R5.5 billion.

  • Interconnection revenue increased 25.1% to R2,608 million. From February 2010, there was a reduction in the peak mobile interconnect rate from 125 cents to 89 cents, with off-peak mobile rates remaining unchanged at 77 cents.

  • With regard to broadband and data revenue, ADSL subscribers increased by 18.1% (compared to 31 March 2009) and Do Broadband subscribers have increased 25.4%. Broadband penetration as a percentage of post-paid lines equals 19%.

  • In addition, total data revenue increased 7.1%, data connectivity services increased by 3.7%, leased line revenue increased 8.1% and Internet access and related services revenue increased 12.9%. Furthermore, managed data network services revenue increased 15.9% -- this includes an increase of 16.3% in satellite services revenue and a 15.9% increase in VPN services revenue.

  • With reference to Telkom International, Telkom's equity stake in the Nigerian Multi-Links operation remains a major concern as EBITDA losses of R659 million were reported, a 191.6% increase from the loss of R226 million reported at the corresponding period last year. This was largely attributable to trading conditions in Nigeria, tough local economic conditions, pricing pressures and the short-term strategy previously in place to reduce inventories and acquire subscribers.

  • During the 2009/10 financial year, Multi-Links' deployed additional packet based mobile switching centres increasing the available capacity from 2 800,000 to 4,000,000 subscribers; rolled out an additional 373 base transceiver stations to 878, increasing total radio capacity (Rf) from 1,800,000 to 3,100,000 subscribers on 706 tower sites, 340 of which are Multi-Links owned and the remaining are co-located.

  • Multi-links also added 2,962 kilometers of optic fibre (1,822 MLTL owned and 1,140 Swop) resulting in a total to 6,673 km (4,639 Multi-Links owned and 2,034 swop). Its DWDM network has been extended to 39 cities.