When Telkom CEO Sipho Maseko took the reins at the company in April 2013, it was “almost ready throw in the towel” on its loss-making mobile operation.
Maseko made the remarks at the presentation of Telkom’s annual results in Johannesburg on Monday.
He said management had taken difficult decisions regarding the mobile business, which is now likely to break even for the first time in the year to March 2016.
Telkom decided build its own mobile network after disposing of its 50% stake in rival Vodacom in late 2008. The company came under heavy fire from analysts for its decision to sell its stake in South Africa’s largest mobile network. Vodacom is now majority controlled by the UK’s Vodafone.
In the years to follow, Telkom poured billions of rand into building its own mobile network infrastructure, with little return to show for it.
This sorry chapter in Telkom’s history may, however, soon be coming to an end.
“We have now effectively de-risked the business,” Maseko said.
For the full year, mobile earnings before interest, tax, depreciation and amortisation (Ebitda) improved by 48,7%, from a loss of R1,3bn in 2014 to a loss of R684m in 2015. Ebitda is a measure of operating profit favoured by telecommunications operators building new businesses.
Telkom’s active mobile subscriber base rose by 21,2% to reach almost 2,2m at the end of March 2015, delivering average revenue per user of R75,05 (up by 19%). Mobile data revenue increased by 50,6% to R988m on the back of a 70% improvement in data usage.
Operating expenditure in mobile increased by 11,9% to R4,8bn, mainly as a result of a 36% rise in the cost of sales to R1,4bn. Capital expenditure, however, fell by a massive 64,8%, from R1,4bn to R481m. This was the result of a “more concentrated roll-out in major metropolitan areas”.
In its 2015 financial year, which ended on 31 March, Telkom announced it increased the total number of mobile base stations by 3,4% to 2 510. The number of 4G/LTE sites grew by 11,3% to reach 1 317.
The company’s proposed deal with rival MTN, in terms of which the latter will take over the financial and operational responsibility for the roll-out and operation of Telkom’s radio access network, is now being considered by the Competition Commission.
The parties intend signing reciprocal roaming agreements, too, to allow customers of either company to roam on the other’s network. — © 2015 NewsCentral Media
