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Future could be rosy for Telkom

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Although Telkom’s operating profit showed a negligible increase this year, it is far from running out of options – however, its success will depend on its ability to leverage its core services and offer value as a converged telecommunications service provider. 

This is according to Frost & Sullivan, commenting on Telkom's annual results released yesterday.
The group reported a 9% increase in operating revenue, but only a 0,1% increase in operating profit. Telkom’s registered a profit of R14,5-billion, but mostly on the back of Vodacom’s R12,5-billion profit. This 2008 profit also remains below the figure of R14,7-billion recorded in 2006.
Frost & Sullivan ICT analyst Spiwe Chireka believes that the most interesting developments from Telkom were its investments in Africa outside of South Africa, which should stand it in good stead. Last year the company purchased Africa Online and it subsequently acquired Multi-Links in Nigeria. These have it well-positioned in key growth markets.
“Multi-Links has turned out to be a wise purchase, with the Nigerian operation hitting the 1-million subscriber mark in May,” Chireka says. “I believe that after all the typical costs associated with setting up new operations have been addressed, Telkom is likely to see significant benefits.”
The establishment of Telkom Management Services Company is also likely to grow its African presence by assisting companies in the telecoms space with the effective management of their network services. It could go some way to addressing the current skills challenges faced by this sector.
“One of the biggest hinderances for growth in Africa has been the limited availability of skills – managerial, technical and operational,” notes Chireka. “The resulting poor performance by operators has resulted in some of them having to sell, in most cases to foreign companies. A company like Telkom Management Services could go a long way to addressing this issue. Given the current state of the telecoms sector in Africa, I don’t think customers will be a problem.”
Frost & Sullivan believes this is a key period for Telkom to establish itself as a converged telecommunications service provider with a focus on its core competencies -fixed-line services, wholesale telecommunications services and the ability to leverage its well-established expertise. Fixed-line data services will play a significant part in its offering and its businesses in the largely underserved African markets offer real growth opportunities.