Pity the parastatal that is commercialised but not privatised. Reg Rumney reports on Telkom’s predicament
READ between the lines of the latest annual report to see the bind that Telkom, the commercialised but not yet privatised South African telecommunications monopoly, is in.
Telkom chairman Jack Clark boasts of a satisfactory 57 percent increase in net income before tax of R1 206-million in the year to end March, compared to an annualised figure for the previous 18-month period.
A more usual way of looking at a companies’ results is to look at after-tax profit. Telkom’s after-tax income was a handsome 84 percent up at R759 746-million _ compared to the previous 18 months, not even to an annualised and therefore lower previous figure.
Of that R633 305-million was retained in the business, and R126 441-million paid to the government, the only shareholder.
So a generous 83 percent of the profit has been retained in the business. A rip-off? Telkom has denied this.
Telkom’s unstated dilemma is balancing two demands. On the one hand, its own internal drive to ready itself for privatisation by increasing productivity, and cutting into its debt mountain of almost R9-billion means that it must reduce staff and focus on profitability.
On the other hand, as a company wholly owned by the government it is vulnerable to pressures not to retrench and it has embraced the ANC’s Reconstruction and Development Programme’s target of providing phones for all schools and clinics within two years.
The inevitable thought occurs that between this particular Scylla and Charybdis sails the buffeted consumer. Tariff increases have been kept below inflation. Particularly, the cost of international calls has actually dropped, probably in response to “call-back” international operations offering low cost international calls. But international calls cross- subsidise domestic calls, so expect further increases on this front.
To give it its due, the results partly show Telkom’s culture is starting to change from that of a parastatal to that of a business operation. But a lack of any real domestic competition, except the tokenism of cellular phones, must limit the pressure to increase service and keep down cost. A look at the number of lines per employee shows how far we have to go to match other developing countries.
And the demand that Telkom fulfil its social obligations is going to cost. The R311-million extra capital spending undertaken by Telkom for the election comes on top of the transition costs for which the 5 percent levy was imposed. Telkom says it will apply for aid funds to finance its RDP obligations, but it will also rely on normal revenue.
Though it may raise foreign loans to replace maturing loans, Telkom says it is not contemplating any extra borrowing overall, which is just as well.
Net interest-bearing debt reduced slightly to R8 753 154- million compared to R8 858 352-million. The net debt-to- equity ratio is down to 1,8:1 from the previous year’s 2,1:1. But a full 16c of every rand of turnover goes to servicing existing debt. This is down from 19c during the previous year, but interest rates have fallen.
On top of this, Telkom, along with other big companies, is under pressure to put in place affirmative action. A total of 8,9 percent of white collar workers now are African, coloured and Asian, says the company.
The annual report shows it has speeded up black recruitment, but has some way to go before the percentages reflect the population as a whole.