South Africa’s part state-owned operator Telkom has released its financial results for the year ended March 31, revealing ZAR1.577 billion (US$146.3 million) profits after tax for continuing operations, with the company heralding the results as proof of the success of its turnaround strategy.
Telkom said operating revenue was up 1.1 per cent on last year to ZAR32.5 billion (US$3 billion), but noted the company is still facing significant obstacles to improving revenues as fixed line voice revenues remain depressed.
“Our efforts to turn Telkom around are starting to produce results. This process will continue to be our focus,” said Sipho Maseko, group chief executive officer (CEO) at Telkom.
“We have managed to stabilise revenues through significant once-off items, which were carefully considered and form part of our strategic imperative to turn around the business and generate sustainable revenues.
“In line with our guidance to stabilise revenues, we have achieved revenue growth of 1.1 per cent for the year, confirming that we still face significant challenges largely as a result of the continued pressure on voice revenue, resulting from fixed-to-mobile substitution.”
Telkom said its efforts to grow revenues in other areas of the company’s portfolio were progressing well, most notably mobile data revenues were up by 80.2 per cent, and revenues from IT business services also growing 69.3 per cent.
“Our objective to further stabilise and grow revenue depends on effectively positioning our resources to drive value and achieving efficiencies across our operating cost base. This will require us to focus our capital expenditure on areas that generate satisfactory returns for our shareholders, and avoid unprofitable operations,” Maseko said.
Operating costs under the turnaround strategy have been cut by 2.1 per cent, Telkom revealed, which was achieved by lowering employee costs, ensuring there are lower bad debts, and implementing improved credit vetting processes.
Telkom said it has implemented a number of cost management measures, such as reducing marketing expenditure and lowering inventory write offs.
The operator has conducted network infrastructure upgrades throughout the year, with capital investment up by 12 per cent to this effect, totalling ZAR6.5 billion (US$603 million).
Telkom said it expects continued challenges over the coming year regarding its fixed line business while also noting the increase in competition, saying improving customer satisfaction remains key to the company’s strategy for the future.
“Telkom’s turnaround depends largely on improving customer service. While Telkom has managed to improve its ratings in various customer surveys, decisions must be guided by customers’ needs to successfully evolve the business further,” the operator said.
“Going forward, Telkom expects to see continued pressure on fixed-line voice revenues, intensified by strong competition, a challenging macro-economic environment and effects of regulatory changes.”
Image courtesy of Shutterstock.
