It will get worse: Telkom CEO
Telkom CEO Nombulelo Moholi says the group’s financial performance will continue to get worse before it improves.
It echoes her sentiments made in June, when the group reported its annual results.
On Monday (19 November) Telkom recorded a 48.9% drop in group profit before tax of R547 million for the six months ended September 2012.
The group reported a marginal decline in revenue for the six months ended September 2012, but an 80.6% decline in headline earnings per share to 37.2 cents.
Shares in Telkom have lost nearly 50% in value in 2012, dropping below R16 last week.
Speaking during a conference call announcing the group’s results, Moholi put a lot of emphasis on how Telkom intended on bringing stability to its troubled management.
The company head added that government would only likely shed light on a long-term strategy for the group in March.
“Telkom is engaged in constructive dialogue with its key stakeholders to chart a successful way forward.”
“While we anticipate government providing an understanding of its policy direction, we remain focused on achieving our current business strategy,” said Moholi.
Following events at the company’s recent AGM – where four non-executive directors were not re-elected to the board by a majority of shareholders – the board has been reconstituted with the appointments of Jabulane Albert Mabuza, Kholeka Mzondeki and Leslie Maasdorp.
On Friday (16 November), the board also elected Mabuza as chairman. The next step in the process will be the appointment of further directors and board committees, Moholi said, which she hoped would reach between 13-14 in number.
Moholi admitted that Telkom’s future performance hinged on the company’s ability to address several key issues, including its engagement with government, which has a 39.8% stake in the group.
Cost cutting
Telkom reported a 1.6% rise in operating expenses to R15.6 billion for the interim period. As a result, chief financial officer Jacques Schindehütte said that Telkom would look to implement cost cutting measures, including those relating to property, procurement related goods or services, costs relating to rural services and labour costs.
He also questioned the group’s ability to launch a fourth mobile player in South Africa “without bleeding cash”.
However, Schindehütte said that a policy to tackle rising expenses could not be agreed upon until new leadership was put in place, following Moholi’s decision to step down as group CEO earlier this month.
While government has expressed its intention to provide broadband for all by 2012, hinting that it may use Telkom as the vehicle to do so, Schindehütte said that Telkom’s commercial viability needs to be addressed.
He said that, while it was vital to get clarity on government’s national broadband plans, it should be viewed in isolation to the commercial reality facing the company.
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