SA paying for Telkom’s sins

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Oh, Telkom. The chickens are coming home to roost.

All those years of mind-numbingly stupid decisions (admittedly mostly by a cabinet appointee who didn’t know anything about telecoms) and government interference have had an impact.

“Headline earnings per share from ongoing operations for the six months ending September 30 this year are expected to be at least 65% lower than the comparative period in the prior year,” the company said.

The last time we saw such precipitous drops was when Nokia and BlackBerry woke up to see they had been creamed by the iPhone. The 65% drop in headline earnings is partially due to the provision Telkom was forced to make for the R449-million fine imposed by the Competition Tribunal for being an abusive monopolist between 1999 and 2004. Telkom, protected by the late Dr Ivy Matsepe-Casaburri, who kept years of competition out of the telecoms market, is paying the price for its past transgressions.

So are we. The government, which holds 40% of stock plus what the pension funds own, should have sold its stake when Telkom listed, exiting with a profit and leaving the adults to run the company.

Earlier this year the cabinet revoked interest in selling 20% of Telkom to South Korea’s KT Corp, a move that appeared to make sense to help inject management sense and broadband savvy into Telkom from the dominant fixed-line provider in the most wired country in the world.

It can’t be helped that Communications Minister Dina Pule is more interested in red-soled shoes than running her portfolio, an all-important industry that is the modern-day equivalent of a railway line. It is an enormous enabler of the internet and its many associated industries. For every 10% increase in broadband penetration, it gives an average 1% of GDP growth in that country, according to research that telecoms executives love to point out. True or not, your bright young kids don’t invent Facebook or Google without it, nor Spotify or Instagram.

You’ve got to have bandwidth and you can’t without proper investment in the infrastructure that makes it possible: broadband. South Africa is years behind the developed world’s fibre-optic networks. These cables are needed for the video-heavy internet of today.

Telkom missed the fibre revolution. Just like it did the ADSL revolution. Nowhere else in the world does a telecoms provider charge you twice – for the line rental and then the ADSL portion. No wonder we’re still suffering from a Telkom hangover.

This article originally appeared on Times Live on 27 September 2012.

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