Telkom on Monday reported interim outcomes for the six months to end-September 2024 that confirmed stable progress in shifting away from the group’s legacy networks and driving demand for its next-generation fibre and 4G/LTE providers.
It reported robust progress in each fibre broadband and in cell, suggesting it’s successful market share from opponents. The share value ticked up on the numbers, displaying buyers are warming to CEO Serame Taukobong’s technique of specializing in next-generation merchandise and ditching legacy infrastructure as rapidly as attainable.
TechCentral editor Duncan McLeod sat down with Taukobong for an interview following the publication of the outcomes. He requested the Telkom CEO about:
- The fast decline in legacy infrastructure, and why ADSL is all however lifeless within the residential market;
- The restructuring at BCX, the place 400 jobs have been lower prior to now two months, and why Telkom is shifting the IT providers firm’s strategic focus;
- How Telkom is planning to make headway in company South Africa towards rivals Vodacom and MTN;
- His views on the Competitors Tribunal’s determination to dam Vodacom’s acquisition of a co-controlling stake in fibre operator Maziv; and
- Why Telkom is not in search of a strategic investor for Openserve.
The interview transcript has been shortened and edited for readability.
Duncan McLeod: Serame, thanks in your time. Please inform me about your technique for BCX? You have got lately been by a spherical of retrenchments.
Serame Taukobong: Positive. Should you take a look at BCX and its friends, not simply in South Africa however globally, they’ve been going by various structural modifications, reshaping themselves to seek out the nuggets and candy spots. BCX has a mixture of some companies which can be decrease margin and better value and among the extra forward-looking companies, that are typically greater margin and with an eye fixed on the longer term. So, sometimes, that’s your cloud, cybersecurity and IT-type of entities.
A part of section 1 of the restructuring was wanting on the BCX ecosystem, versus your cell ecosystem. This enterprise sells individuals, proper? It’s nearly like a consulting sort of proposition the place it’s billing human assets, to place it fairly bluntly, so like a typical marketing consultant ecosystem. And what we’ve carried out in section 1 is ask what elements of our workforce are billable, and that’s the unlucky, brutal transition that we’ve needed to make in section 1: wanting on the billability of our individuals, which has resulted within the exit of round 400 workers prior to now two months.
The second half can be extra a broader structural factor the place we are saying the enterprise models that aren’t in step with that progress profile, we’ll exit in a lot the identical journey as your EOHes and AONs have carried out. That is the path for BCX.
The third half is basically leveraging the energy of the broader Telkom ecosystem to say, connectivity will get us in, and that may be a mixture of Openserve and Telkom Cell. BCX has a whole lot of robust company shoppers, like an Absa, for instance, or a Normal Financial institution, but when we are saying, ‘What’s Telkom Cell’s share in these, it’s fairly low, as a result of traditionally, once we went into these environments, Telkom Cell was a comparatively weak proposition (in comparison with Vodacom or MTN).
So, how will we maximise, for instance, in attacking a Normal Financial institution or an Absa now that Telkom Cell is stronger. We will present them with a One Telkom answer and cut back their spend by X quantity, as a result of now we will present a complete providing.
So, that’s the journey of BCX: the place prior to now they had been combating on their very own, now they arrive with the One Telkom strategy to make their combat extra complete.
DM: You mentioned you’re not searching for a strategic fairness companion for Openserve. What’s your tackle the Competitors Tribunal’s determination to dam Vodacom from buying a co-controlling stake in fibre operator Maziv. Do you assume that was the precise transfer? I do know you haven’t seen the explanations doc but, however given the discuss in regards to the want for consolidation within the fibre market, do you assume that this has had a unfavorable affect on the potential for consolidation, and the way does the tribunal’s determination have an effect on Telkom?
ST: Let me put on my trade hat to reply that. If we take a look at what’s taking place globally, consolidation within the trade is a development – and it’s a pure development. When a deal of this magnitude (Vodacom and Maziv) is blocked – and we don’t but know the explanations – it definitely does put a dampener on the worldwide funding view of our trade. Should you take a look at trade tendencies, regardless of the optimistic outcomes that we’ve delivered right this moment, in case you take a look at the trade broadly, consolidation is pure.
So, it’s an fascinating directive that has come from the Competitors Tribunal, particularly when the communications authority, which is Icasa, accepted the deal. Buyers might begin to query who’s the authority that’s driving the telecoms trade.
DM: What’s Telkom’s considering across the subsequent spectrum public sale, which is scheduled for the 2025/2026 monetary yr – so, by March 2026? What are you hoping to see from the public sale?
ST: The primary half is we requested Icasa to do an in depth evaluation of the spectrum allocation and competitiveness and competitors course of flowing from the final public sale, which I feel Icasa has began – and that’s encouraging. It’s vital for Icasa to ask what the specified final result of that public sale was, and whether or not that final result was achieved.
Was their intention to increase 5G protection throughout the nation, and has that been achieved? As a result of in case you take a look at what occurred following that public sale, we had extreme load shedding and a major quantity of capex, throughout all community operators, was spent on cures to take care of it, and the trade nonetheless has not obtained any of the aid from authorities we’ve got sought, and this hampered the enlargement of 5G.
So, if you exit on one other public sale, anticipating the trade to spend extra billions extra, challenged as we’re on capex and comparatively low income progress, what precisely is Icasa in search of to realize?
The opposite key factor that we additionally sought to deal with was whether or not it was going to stability competitors, as a result of that’s the key subject that we mentioned Icasa should look to deal with. It’s not nearly embarking on a spectrum public sale and what bands we’re hoping to get, however it must also be about addressing the important thing subject of competitiveness available in the market.
DM: The robust progress you’ve seen in your cell enterprise, which has clearly been knowledge led, would counsel that you’re taking market share out of your rivals. If that’s the case, are you taking it throughout the board, or is there one particular competitor you’re taking it from?
ST: Should you take a look at the form of the Telkom Cell proposition, from the onset, being a late entrant to the market, we constructed a robust, data-driven proposition. And our buyer base is considerably 4G pushed. Now, the place is the market going to? It’s now about clients driving progress into 4G. 3G is now just about a factor of the previous. Now you must take a look at the form of our organisation versus the competitors. Our opponents nonetheless have fairly a good portion of 2G and 3G subscribers, and that’s the place their progress remains to be coming from. As subscribers are shifting from 2G to 4G, the enticing proposition that they’re seeing available in the market is Telkom Cell.
DM: What about 5G? So far as I do know you haven’t enabled 5G on smartphones but. What’s your strategic plan for 5G?
ST: No, we’ve got enabled 5G, however the important thing factor for us is the 5G ecosystem is basically going to be value pushed. 5G units are nonetheless fairly costly, and we strongly really feel that in case you take a look at our 4G proposition, each from an output and a quality-of-service perspective, it’s nonetheless precisely what clients need. Proper now, the people who find themselves creating wealth from 5G are your suppliers of kit, so your Huaweis and Nokias. Because the 5G ecosystem turns into extra pervasive and the price for the tip person comes down, that’s the place you’ll begin seeing the expansion and output. However proper now, we really feel that the proposition that we’ve got in 4G actually meets buyer calls for, and notably from the end-user gadget perspective.
DM: I do know you’re shifting to get off legacy copper and ADSL as rapidly as attainable. The place do you stand with that transition? What number of ADSL clients do you continue to have in your community? And at what level are you going to change off or decommission your copper community solely?
ST: ADSL is slightly below 70 000 remaining, and an enormous portion of that rests in authorities workplaces. And what’s been encouraging about that’s we renewed our authorities contract by the State IT Company (Sita), so within the subsequent 4 to 5 years – and we need to do it a lot sooner – we’ll migrate a good portion of these workplaces from legacy copper onto fibre. In Openserve, 81% of our income is now sitting on fibre or our next-generation platforms. Within the subsequent 18 months, as we execute on that Sita contract, it’s about protecting over 6 000 workplaces nationally. It’s an enormous undertaking of upgrading and shifting these workplaces from legacy infrastructure to fibre.
DM: It feels like within the residential market, ADSL is already mainly lifeless.
ST: Sure, it’s very small. And the place there’s copper theft, we don’t substitute the copper anymore. We then transfer clients to LTE.
DM: Lastly, you could have mentioned beforehand that you just hope to renew dividend payouts, which had been suspended again in 2020. Are you on observe to try this?
TS: We reinstated the dividend coverage, however the cost of a dividend can be decided by the board and the priorities for the enterprise by way of what the inner capex necessities are. So, we’ve not finalised whether or not we pay the dividend at year-end, however we’ve reinstated the coverage and any funds can be strongly primarily based on the extent of free money circulation. – © 2024 NewsCentral Media
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