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Stability needed at Telkom, say analysts

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Telkom has experienced a marked increase in both its data subscribers and revenues, as shown in the interim results released yesterday.

An increase of over 46,000 ADSL subscribers and over 3,000 managed data network sites saw an overall increase of 3% in the year on year data revenues.

Despite the increase, Telkom continues to experience challenges as the operator’s fixed line subscribers continued on a downward trend, recording a 10.2% decrease in voice usage and a decrease of 181,000 fixed line subscribers.

In the interim results for the period ended September 2012, Telkom’s year on year revenues decreased by 1.5%. The EBITDA also decreased by 17.7%, with headline earnings down by about 80%. The decrease in headline earnings was partly attributed to a provision for the fine imposed by the Competition Tribunal.

“Regulatory driven price decreases and increased competition, particularly in the form of fixed-mobile substitution, are expected to continue placing pressure on Telkom revenues” says Frost & Sullivan’s Information & Communication Technologies (ICT) research Analyst, Gladys Mujuru.

“However, there is noted improvement in the mobile unit, 8ta, and continued increase in ADSL subscribers which could be attributed to price decreases,” Mujuru says.

Telkom 8ta’s subscriber base managed to surpass one million, increasing by 52% to reach 1.1 million, leaving the mobile service provider with 2.2% market share, up from 0.9% in the previous year.

Telkom has also launched new products which take advantage of its extensive infrastructure network. The launch of the FMC bundles and the upgrade of ADSL speeds are expected to drive further uptake. However, the anticipated bit stream access may put more strain on Telkom’s revenues.

With data usage continuing on an upward trend, and voice usage decreasing, Telkom’s future focus on an all IP network may provide a solution, believes Frost & Sullivan. Strong performance in the wholesale division also indicates that the incumbent operator has not been greatly affected by self-provisioning. However, there is still stability required at board level and senior management if the company is to fully realise its potential.

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