‘COVID-19 is fast-tracking digital transformation’ and fuelling growth – Telkom CEO

By Xolisa Phillip, in Johannesburg

Posted on Wednesday, 12 August 2020 13:10, updated on Tuesday, 25 August 2020 11:49
Telkom's group CEO Sipho Maseko. REUTERS/Siphiwe Sibeko

Listed telco Telkom expects growth in ICT driven by the rise in remote work, despite a dire economic outlook, says group CEO Sipho Maseko.

“This demand has been spurred by the increase in people working remotely during the various levels of lockdown and their growing demand and adoption of digital and telecommunication services,” stated Maseko in Telkom’s latest annual integrated report published on 7 August.

However, the company has ordered a halt to its dividend policy, effective for three years starting in the 2021 financial year. It will do this to optimise working capital, as well as in preparation for an impending auction of coveted spectrum and capital expenditure.

The South African government has a 40.5% equity stake in Telkom. The telco’s institutional investors include the Public Investment Corporation (14.8%), the Black Rock Institutional Trust Company (2.1%) and Sanlam Investment Management (1.7%).

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The group has four divisions – Telkom Consumer, OpenServe, Telkom Small & Medium Business and Yellow Pages – and two wholly owned subsidiaries: Gyro and BCX, which was previously known as Business Connexion.

  • BCX has a presence in Botswana, Mozambique, Namibia, Zambia and the UK. It is the largest ICT service provider in Mozambique and Namibia. In Zambia, BCX is the official Oracle Platinum partner. It offers services to clients in retail, mining, healthcare, financial and the public sector.
  • In the past two years, BCX underwent a restructuring that resulted in the disposals of BCX Nigeria and BCX Tanzania.

“We are reviewing our business portfolios and exploring how we can unlock value from these businesses over the next three years. The value unlock programme is underpinned by valuation, strategic imperatives, and capital allocation,” Maseko explained.

Aggressive pursuit of customers

Although COVID-19 has created uncertainty and placed more pressure on an already fragile South African economy, some sectors have benefited. In this instance, telcos, which are seeing a surge in demand for their services.

“The COVID-19 pandemic is fast-tracking digital transformation in companies. Businesses need to adapt quickly or risk redundancy,” noted Maseko.

“During the lockdown, Telkom has seen a surge in fixed and mobile network traffic for our telecommunications services, due to more people working from home,” he added.

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Telkom has met the demand because of its scalable network. Furthermore, the telco’s investments modernising the network, which include fibre backhaul, have supported the increased traffic without straining the network.

  • “In response to COVID-19, we enhanced our broadband-led propositions across our customer segments.”
  • “We took advantage of our existing copper network. … We launched broadband on copper services and utilised spare capacity ports to cater for individuals working from home and for students engaging in distance online learning, with aggressive price points, to ensure customers have access to broadband,” according to Maseko.

Additional innovations include scaling its digital platforms because of store closures and establishing the Telkom business e-commerce platform.

The latter “allowed business customers to purchase Telkom connectivity products online 24/7,” said Maseko, adding, “we managed to launch the platform with the help of logistics partners and our own OpenServe for fibre-related products.”

Priority spending

Tsholofelo Molefe, group chief financial officer, explained that Telkom’s board found it prudent to suspend the company’s dividend policy for three years.

“Over this period, the capital will be redirected to the acquisition of spectrum and to complete the key capex programme to ensure the sustainability of our business,” said Molefe.

However, “the board will consider shareholder rewards in the event of excess cash from potential value unlock,” clarified Molefe.

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