Fixed-mobile synergies study under way

5th December 2003 By: nkolola halwindi

Telecoms operator Telkom says it is currently undertaking an international study on ways to extract synergies between its fixed-line and mobile operations – the company is a leading shareholder in South Africa’s leading cellular network operator, Vodacom.

The initiative is one aspect of a five-part business strategy being pursued by the utility, which is seeking to consolidate its market leadership and improve service levels ahead of the introduction of fixed-line competition.

The other areas of focus include growing its data and mobile offerings, supporting black economic empowerment, improving customer service, and driving cost savings.

Speaking at the company’s interim results for the year ending September 30, CEO Sizwe Nxasana said the company hoped to take advantage of synergies between Telkom and Vodacom in line with the international trend towards convergence.

He argued that synergies could be unlocked in the area of procurement, marketing and sales and in the bundling of products and services.

It is understood that Telkom and Vodacom are already jointly renegotiating equipment-supply and satellite-service contracts, which could yield large cost savings.

“We are looking at sharing procurement and marketing synergies, offering co-branded services and newly-bundled fixed and mobile products,” said Nxasana.

He revealed that Telkom branches and Vodacom shops were already beginning to offer fixed and mobile products and services and that this trend would continue.

Further, the company hopes to offer bundled services and products to its existing and new clients.

Telkom announced an impressive set of results for the interim period, with headline earnings a share rising by more than 170%, and net profit surging by R1- billion to R1,663-billion on the comparable period. In fact, its free cash-flow generation of R3,9-billion in the first six months was nearly equal to the cash flow for the entire 2002 financial year.

The fixed-line segment delivered solid revenue growth, driven largely by data volume growth.

Margin expansion was achieved through a strong focus on cost cutting, improving productivity and enhancing the segment’s competitiveness.

In the period under review, good growth was achieved in value-added services, with these services penetrating 58% of the residential customer base.

On the other hand, the mobile segment achieved a 20% growth in customers locally, with a record gross number of connections of 2,2-million and a contract churn of 11%.

Vodacom made progress in the realisation of its African strategy, reflecting a 98% increase in customers to over a million, and remains strongly positioned for further expansion into the continent.

Expanding into the rest of the continent is one of the key areas of focus, stated Nxasana.

The company hopes to launch as the second licensed mobile operator in Mozambique before the end of the year.

It is also currently considering a proposed investment in Nigeria’s second-largest mobile operator, which may see it entering this rapidly-expanding market, with a population of about 120-million.

“We are also considering establishing markets in Kenya and Angola,” concluded Nxasana, indicating that this growth could be acquisitive in nature.