The mystery of Telkom’s strategy solved

Following a year of confusion regarding Telkom’s future strategy, having seen a merger deal with KT Corp blocked by government, the group’s CEO, Sipho Maseko finally provided clarification on its plans.

Having blocked the merger deal with the Korean based operator in May 2012, cabinet asked the minister of communications, Dina Pule, to report back to it about all the options that were available for Telkom.

The DoC confirmed in September that a shortlist of three strategic options for Telkom had been presented to cabinet.

However, those options were handed back to the DoC for re-submission, Pule then citing delays in February due to a board re-shuffle at Telkom.

However, last week (14 June), Maseko told BusinessTech: “I have the strategy, the strategy is mine. It is very clear; if I get it wrong I get fired.”

He pointed to the appointment of Dr Miriam Altman as head of strategy of Telkom Group, to drive the group’s plans moving forward.

Telkom delivered yet another disappointing set of results for the year ended March 2013, highlighted by a 73.2% decline in headline earnings per share to 87.0 cents.

Group operating revenue decreased by 1.7% to R32.501 billion (2012: R33.079 billion).

The board also took the decision to impair the carrying value of the assets of the group by R12 billion for the year ended 31 March 2013.

Maseko pointed to “severe” challenges in the group’s revenue and cost structures. “This is not lost to the team,” he told media, investors and analysts in Sandton.

The CEO also highlighted the challenge it faces with in its relationship with government, which has a 39.8% direct ownership of Telkom. He said that there is a “big effort” to converge and align both parties’ interests, with government seeing Telkom has a key player in its national broadband plans.

Maseko painted a broad picture of where the company would look to improve its financial position in the financial year ahead, including the maximising next generation networks (NGN) efficiencies and returns, effective management of 3rd party spend, customer service effectiveness, and its current staffing, which accounted for in excess of 30% of its revenue base in the reporting period.

However, government has made it clear that it views Telkom as a key and strategic asset in driving its policy of rolling out broadband for citizens before 2020. Government has a 39% interest in Telkom.

“The year ahead promises to be an interesting one for Telkom, as changes in leadership at both the executive and management level begin to take effect and the true cost of its ongoing voluntary retrenchment scheme becomes evident,” said Gareth Mellon, ICT analyst at Frost & Sullivan.

“Recent activities have suggested a commitment to decisive action and, given the recent share price increases, this already appears to have improved perceptions of the company’s future.”

Sipho Maseko
Sipho Maseko

Meanwhile, on Thursday (20 June), one of the unions currently in discussions with Telkom over its current wage dispute with employees, Solidarity took to Twitter to vent its frustration with the company.

Negotiations between Telkom and unions, including the CWU and the SA communication union began in March, after Telkom announced that management and bargaining unit staff would be afforded the opportunity of applying for voluntary severance packages (VSPs) and early retirement packages (VERPs) until the end of August 2013.

Solidarity said that the discussions had “consumed 18 working days so far” and following yet another day of no agreement, both parties would head back to the Commission for Conciliation, Mediation and Arbitration (CCMA) on Monday (24 June), despite Solidarity claiming it was ready to accept Telkom’s 6% offer to its members.

“Telkom wage talks: Telkom flips the apple cart as it proposes a new functional grade average wage offer,” Solidarity said in a tweet.

Solidarity had previously demanded an 8.8% increase.

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The mystery of Telkom’s strategy solved