From near death, Telkom – the country’s fixed-line telephone giant that was on life support for years – finally seems to have recovered enough to be ready to call its main shareholder and others to inform them that it is raring to go. By Gugu Lourie
Sounds ridiculous … right?
In the past three years market pundits claimed that Telkom being a partially state-owned entity would always be subject to SA Government interference.
The sentiments persisted even after Sipho Maseko was appointed Telkom boss in 2013.
But since then Maseko has bucked the trend and confounded Telkom’s critics and put the company on a profit trajectory.
The company on Monday rewarded investors with second dividend to thank them for their patience while the business was being fixed. Telkom declared a 270 cents dividend, up by 10% for the financial year to end-March 2016 compared to 2015. For the full year, earnings before interest, tax, depreciation and amortisation (EBITDA) was up 16% to R11 billion and operating revenue rose by 14% to R37 billion.
Clearly Maseko and his team of executives and the board led by Jabu Mabuza, have ‘saved’ Telkom and ‘turned its fortunes around’.
Maseko stabilised Telkom to a level where investors rediscovered their interest in a traditional fixed-line telephone company.
Previously, Telkom had been losing revenue.
Speaking at an investor and media briefing on Monday Maseko said the financial framework of Telkom was stable.
This is good news for a company that has been faltering since the departure of Sizwe Nxasana in 2005.
The leadership that took over from Nxasana pushed Telkom into unchartered territory, which nearly made it bankrupt.
On Monday at the briefing, Maseko was at pains to state that Telkom wasn’t declaring victory yet despite posting a 15.5% rise in normalised headline earnings per share (EPS) to 658 cents in the financial year to end-March 2016. Headline EPS is South Africa’s main profit gauge.
“We are not declaring victory yet, we are stable and like Leicester City we have survived relegation,” said Maseko.
Leicester City, minnows of the English Premier League, produced one of the most endearing fairytales in the history of English soccer. The season before the soccer club survived relegation. However, they lifted the lucrative premiership cup by the end of the season to the surprise of their most detractors and supporters.
“What happens to Leicester City only happens in odd 100 years. For us, for sure, we know have survived relegation; how do we keep going up that league table step by step in a way that we don’t go back,” said Maseko.
“That’s how we will play it. We are now five places above relegation zone and now we need to move four place up.
“When we ready to win the league we will tell you that this year we will win the league and will win it, but now we are safely out of the relegation zone.
“We are climbing the league table and think we have built the right building blocks and the machine have responded well.
“What will be the critical enabler is the culture – behaviour and how we do things like … to lead, manage and play as a team. The cultural nervousness of the machine will probably be the most important thing,” said the Telkom boss.
Maseko said Telkom was about in a good position to gain market share, considering its rivals in the telecoms sector are not doing that well. MTN was hit by massive $3.4 billion fine in Nigeria and Vodacom lost the Please Call Me court case that could cost it billions of rand.
Telkom and its executives and the board must be congratulated for not going back to the state for a bail out to rescue it while it was faltering. The state also deserve kudos for lifting its pedals on interfering with the company’s affairs when it was faltering.
Hopefully, this will be a lesson for state organs that corporates similar to Telkom needs to be given independence to swim in a big sea and survive on their own.
Looking at the achievements by Maseko so far and plans to ready the business for growth, I believe Telkom is on a winning trajectory considering that Telkom boss so far has delivered good medicine to a patient that was stuck in big rocks. For more read: Telkom is like a big ship stuck in the rocks
Perhaps, Telkom is on a serious growth trajectory and its aims of being of top the South African telecoms market is not far-fetched.
And Maseko seems to take a calculated move as he explains that “the assurance we want to give everyone is that we are very clear of what needs to be done. We are very clear of what implementations plans look like. We now have to go and really execute with precision the things we need to do.”
Therefore, Telkom must invest carefully in growing its fibre business and building new products and technologies that will strengthen its business.