SIKI MGABADELI: Telkom SA, South Africa’s biggest landline provider, reported a rise in full-year earnings and revenue today, boosted by a strong performance by its mobile business and its Business Connexion enterprise division.
Telkom shareholders are going to receive a 56% higher dividend for the year to end-March than in the prior year after the group declared a final dividend of R2.91, taking the total for the year to R4.22.
Let’s chat to CEO Sipho Maseko. Sipho, Thanks so much for talking to us today. I think we’ve spent the past few years focusing so much on the turnaround strategy that it’s nice for the first time to actually look at the day-to-day operations. I’m sure that that’s a relief for you as well.
SIPHO MASEKO: Sure. It is a relief but also I suppose it goes to show that we have been very disciplined and focused in the execution of the strategy. And we’ve focused, in my view, on the right inputs and outputs to be what they are. I think we’ve made decent progress.
SIKI MGABADELI: Is that turnaround done, now? Are you looking forward?
SIPHO MASEKO: The first phase of the turnaround is effectively done. That entails how we stabilise the mobile business, how we take cost inefficiencies out, how we get a lot more discipline and how we allocate capital – all of that stuff I think is done. Our mobile business is now stable and sustainable. I think we have a lot more discipline in how we allocate resources, and a much better grip on our costs. I also think we’ve made the right platform for growth.
The next phase is really around how we transition to growth, and our operating model evolution is beginning to take us to that sort of approach.
SIKI MGABADELI: Now, how much have you been able to save, and how are you better allocating resources?
SIPHO MASEKO: Well, a couple of things. I’ll start with capital expenditure. First and foremost we really are beginning to prioritise in terms of the areas that will drive growth going forward. The part of the business that has been getting disproportionate allocation of capex is our mobile business, and fibre investment. Why those? Because really broadband connectivity is the future. We spent a lot of time making sure that in our fixed business we are modernising the network effectively.
We introduced fibre – be that to the business or to the home. That will enable us to carry a lot more internet traffic over the network.
Insofar as costs are concerned, you know by now we reduced our headcount significantly over the last three to four years. We have reviewed our third-party spend. I think we collaborate a lot better with our suppliers. We find joint ways through which we can deal with inflation so that they don’t just pass inflation on to us, because we can’t pass it on to our customers. Our customers want more data for less, they want more bandwidth for less, so our suppliers are beginning to come to the part to make sure that they drive their own cost-efficiency programmes in how they do business with us.
SIKI MGABADELI: The fixed-line business – how do you see its future? Is it going to be in the fibre to the home?
SIPHO MASEKO: I think that the notion, Siki, of a fixed-line business over time will be immaterial. The broadband market is effectively converging. People no longer care whether they are getting broadband via mobile or fixed line. They just want it to be fast, they want it to be reliable, and they want it to be at the right price. I think that what we have been doing is effectively to make sure that the technology platform that we use on the mobile side is the same as on the fixed side. On the fixed side it’s fibre. In a sense it’s what they call an IP-based network, which is both mobile and fixed.
And for us this has enabled us to sell what I would call converged bundles. You can buy mobile or fibre. We now have products where essentially you pay the same price for both. You get home, and you can get high-speed broadband, while on the move you can still get good-quality high-speed portment.
SIKI MGABADELI: All right. Let’s talk spectrum, the minister saying that operators won’t have to give back spectrum just yet. We know that the big operators have been very concerned about the billions that have been invested in the networks. What’s your position on allocation?
SIPHO MASEKO: I think not giving back spectrum is very enlightened, because quite a lot of capital is invested which can be monetised over a long period of time. Once you say spectrum will be returned, what you will have is that investment won’t flow through. And if investment doesn’t flow through, prices will not come down. And if prices don’t come down, broadband will not grow. So I really support that. I think it’s very, very enlightened.
At the same time, though, we still need to deal with how we get the right allocation philosophy for future spectrum allocation. That is the part of the debate that is still open. We have our own views, but we are engaging with the minister and I think, to be very frank and fair, they’ve been very open-minded in terms of getting input from the rest.
SIKI MGABADELI: “Transitioning to growth” is a term that you mentioned a little earlier. What’s that going to involve? More investment in mobile, more concentration on Business Connexion? What’s it going to mean for Telkom?
SIPHO MASEKO: Well, a couple of areas. I think in mobile it will be high-speed broadband, fixed and mobile. On the enterprise side it will be largely driven by two things. In cloud computing we are the biggest partner of Cisco in SA, and we are the biggest partner of SAP, really making sure that we take cloud computing technologies to our customers.
Secondly, on the BCX side, it will be the Internet of Things – making sure that everything is connected and leveraging all of that to assist our customers to interact with their clients a lot more effectively.
Then on Openserve, it’s really going to be around investing for the future. When you invest in fibre, it’s not the kind of stuff that gets paid back in two years. A cyber player will last there for the next 30/40 years, so [we are] really making sure that our economic modelling may enable us to invest for the future, and through it then build an e-commerce platform that will transform just how businesses do commerce in the country.
There are some other small areas. VS Gaming – we’ve launched a new gaming platform. We think people will change how they play into the future. And we’ve also set up a property business where we’ve taken the entire real estate of Telkom, which has never been monetised, – now we’ll be looking to find ways of monetising it as technology gets better.
SIKI MGABADELI: We’ll leave it there. Thanks for your time. Sipho Maseko is CEO of Telkom.
Brought to you by Moneyweb