As Telkom works to reorganise itself into a more streamlined structure, the market is still adopting a wait-and-see approach on its future plans. The telecommunications operator is yet to provide a clear picture of how it will grow its business after the sale of Vodacom.
Telkom released its year-end results today, showing a 6,9% increase in group operating revenue, but decreased earnings, margin and profits. Operating expenses jumped 19,5%.
South Africa remains the main focus of business, with good growth in data revenues.
"Telkom needs to reposition itself as a matter of urgency," says Frost & Sullivan ICT industry analyst Spiwe Chireka. "The sale of Vodacom has cast doubt on the future performance of the company, as it continues to be viewed as a fixed line operator. Given that fixed line services are losing ground to new technologies, it is important that it takes a page out of the books of mobile operators like Vodacom and MTN."
Chireka notes that these companies are increasingly repositioning themselves as integrated telecommunications providers and promoting this image. She believes that as long as Telkom doesn't manage to cast itself in this light, confidence in the operator will continue to decrease.
"A good image and positioning is key for both customer acquisition and the company's expansion plans," she says. "Telkom needs to work quickly to turn the Vodacom sale into something positive."
Frost & Sullivan believes that the cash generated by the sale of Vodacom should enable Telkom to invest in highly lucrative opportunities such as the expansion of Next Generation Networks into Africa.
"Competition in the South African market has intensified and is bordering on cutthroat, especially with the implementation of the new licensing regime and Seacom coming online this year," Chireka says. "Telkom therefore has to start shopping for opportunities outside of these borders."
Frost & Sullivan has seen unprecedented growth by fixed-wireless access providers, especially on CDMA networks elsewhere in Africa. This could present a frontier for expansion for Telkom, as the mobile and broadband markets are increasingly becoming saturated.
The company does, however, note in its results that its initiatives inAfrica have posed difficulties due to high start-up costs, the challenges associated with new markets, infrastructure and technology challenges, skills requirements and volatile currency and interest rate markets.
"Converged service offerings to businesses are also seeing growth in the South African telecoms market," Chireka notes. "With the vast investments Telkom has made in its Next Generation Network, it is likely to be well positioned to take advantage of this."