Although ratings agencies and the market would have found comfort in Telkom closing the R2.6-billion share sale with the South Korean KT Corporation, there was no need for the telecommunications operator to panic, CFO Jacques Schindehütte said on Friday.
Communications Minister Dina Pule, last week, informed the group that Cabinet would not support the potential strategic deal between Telkom and the South Korean firm, which had intended on acquiring a 20% stake in Telkom for R2.6-billion.
KT had initially offered R3.8-billion for the stake but, in May, lowered the offer, citing a weaker Telkom share price.
Speaking at Telkom’s results presentation for the 2012 financial year, on Friday, Schindehütte stated that Telkom was disappointed that not everyone had seen the benefits of the KT deal.
“It would have been nice to have had the R3-billion from KT Corporation,” he added.
Nevertheless, Schindehütte emphasised that Telkom was still profitable, was generating strong cash flows, had a low gearing and the organisation understood where its future growth would come from, which would all contribute to the group’s success going forward.
Telkom CEO Nombulelo Moholi added that the group would remain calm and focused on its strategy, stating that it was determined to succeed.
She pointed out that the while the group continued to face many challenges, such as declining voice revenues, legacy regulatory obligations and a competitive market, there were also opportunities for growth.
Going forward, Telkom planned to focus on data and broadband, as well as fixed mobile convergence (FMC).
Moholi emphasised that, while questions over whether Telkom could succeed in the mobile market remained, the group was committed to its 8ta mobile offering.
“Telkom will not have a future without this,” she stated.
The group believes that mobile is an integral part of ensuring its future growth and plans to focus on growing its data revenues.
In the 2012 financial year, the group had launched a number of data offerings and, to date, it has built 1 849 base stations to grow its mobile capabilities.
A further 1 000 base stations would be added to the network in the 2013 financial year.
Schindehütte, who is also acting MD of the group’s mobile arm 8ta, added that the group planned to reduce its earnings before interest, taxes, depreciation and amortisation (Ebitda) losses in mobile by about 20% in the 2013 financial year.
He conceded that this was not as much as the group might have liked to reduce the losses by, but said investment in the business was necessary to position it to compete in the data world.
8ta earned revenue of R1.2-billion in the 2012 financial year, but suffered an Ebitda loss of R2.2-billion.
Telkom planned to spend between R2-billion and R2.5-billlion in capital expenditure (capex) in the mobile division in the 2013 financial year.
Schindehütte highlighted that the group planned to spend between R18-billion and R21-billion in capex overall over the next three years on building a differentiated data capability.
Existing surplus cash reserves of about R2-billion could be used to help fund this capex, which was required for the group’s drive to grow its data and FMC offerings.
Further, he said that, owing to the group’s low gearing, it could double its current debt, which could be a source of funding, should it be required.
In response to questions from analysts and shareholders about whether the capex spend would translate into a return on investment, Moholi conceded that Telkom had, in the past, pumped money into areas it should not have.
She called Telkom’s investment in the Nigerian Multi-Links company an “embarrassing mistake”, but said that the group had admitted its mistakes and had taken a beating.
Telkom reported a R1.3-billion foreign exchange loss on the sale of the Multi-Links business to Helios Towers Nigeria in October 2011.
Moholi, who has been at the helm of Telkom since April last year, assured shareholders that, despite these setbacks, the group was determined to move forward.
She emphasised that Telkom ensured that no programme would be funded without a proven business case.
Schindehütte added that the group was committed to generating a return on investment in the years to come.