Telkom’s plan to fix BCX

Telkom Group CEO Sipho Maseko said the company is in talks to provide a boost to its struggling BCX business unit, reports the Sunday Times.

BCX was the hardest hit of Telkom’s businesses over the most recent six-month business period, which it said has been in part due to companies reducing their investment in technologies as a result of the pandemic.

Following the release of Telkom’s results last week, Maseko told the Sunday Times that Telkom has plans to acquire niche technology companies to improve BCX’s offerings.

He also claimed there are plans to enter into a strategic partnership with an unnamed international company — a relationship focused on scaling BCX’s cybersecurity option.

This relationship will be valuable because a “strategic equity partner with international footprint provides economies of scale to provide the right solutions to clients,” said Maseko.

Denker Capital portfolio manager Claude van Cuyck told the paper that he has doubts about the future for BCX.

“BCX has underperformed its peers for a while now and I don’t expect it to improve significantly,” said van Cuyck.

“Selling BCX may be a good idea, but at what value? They should not have bought it in the first place.”

Telkom’s weak interim results for the six months ending 30 September 2021 caused the company’s share price to plummet by 10% last week.

Telkom’s net debt to EBITDA increased from 0.9 to 1.1 times, with the company’s fixed-line services being particularly hard-hit.

This area of the business declined from 1.4 million to 1.1 million, while its fixed broadband subscribers decreased from 638,000 to 563,000.

BCX’s revenue sunk by 6.1% to R7.5 billion.

On the positive side, Telkom’s headline earnings per share (HEPS) increased by 30.4% to 285.5 cents, while basic earnings per share (BEPS) rose by 27.3% to 276.8 cents.

This was driven by Telkom’s mobile unit, with mobile subscribers increasing by 18.8% to 16.3 million, and mobile revenue rising by 9.7% to R10.4 billion.

“Telkom Mobile continues to optimise the cost to serve as it grows, with the optimisation of roaming expenses contributing to the improvement in EBITDA,” said Telkom.

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