Telkom on Monday reported interim results for the six months to end-September 2024 that showed solid progress in moving away from the group’s legacy networks and driving demand for its next-generation fibre and 4G/LTE services.

It reported strong growth in both fibre broadband and in mobile, suggesting it is winning market share from competitors. The share price ticked up on the numbers, showing investors are warming to CEO Serame Taukobong’s strategy of focusing on next-generation products and ditching legacy infrastructure as quickly as possible.

TechCentral editor Duncan McLeod sat down with Taukobong for an interview following the publication of the results. He asked the Telkom CEO about:

• The rapid decline in legacy infrastructure, and why ADSL is all but dead in the residential market;
• The restructuring at BCX, where 400 jobs have been cut in the past two months, and why Telkom is shifting the IT services company’s strategic focus;
• How Telkom is planning to make headway in corporate South Africa against rivals Vodacom and MTN;
• His views on the Competition Tribunal’s decision to block Vodacom’s acquisition of a co-controlling stake in fibre operator Maziv; and
• Why Telkom is no longer seeking a strategic investor for Openserve.

The interview transcript has been shortened and edited for clarity.

Duncan McLeod: Serame, thank you for your time. Please tell me about your strategy for BCX? You have recently been through a round of retrenchments.

Serame Taukobong: Sure. If you look at BCX and its peers, not just in South Africa but globally, they have been going through quite a lot of structural changes, reshaping themselves to find the nuggets and sweet spots. BCX has a mix of some businesses that are lower margin and higher cost and some of the more forward-looking businesses, which are generally higher margin and with an eye on the future. So, typically, that is your cloud, cybersecurity and IT-type of entities.

Part of phase one of the restructuring was looking at the BCX ecosystem, as opposed to your mobile ecosystem. This business sells people, right? It’s almost like a consulting type of proposition where it is billing human resources, to put it quite bluntly, so like a typical consultant ecosystem. And what we’ve done in phase one is ask what parts of our workforce are billable, and that’s the unfortunate, brutal transition that we’ve had to make in phase one: looking at the billability of our people, which has resulted in the exit of around 400 staff in the past two months.

The second part will be more a broader structural element where we say the business units that are not in line with that growth profile, we will exit in much the same journey as your EOHes and AONs have done. This is the direction for BCX.

The third part is really leveraging the strength of the broader Telkom ecosystem to say, connectivity gets us in, and that is a combination of Openserve and Telkom Mobile. BCX has a lot of strong corporate clients, like an Absa, for example, or a Standard Bank, but if we say, ‘What is Telkom Mobile’s share in those, it’s quite low, because historically, when we went into those environments, Telkom Mobile was a relatively weak proposition (compared to Vodacom or MTN).

So, how do we maximise, for example, in attacking a Standard Bank or an Absa now that Telkom Mobile is stronger. We can provide them with a One Telkom solution and reduce their spend by X amount, because now we can provide a comprehensive offering.

So, that’s the journey of BCX: where in the past they were fighting on their own, now they come with the One Telkom approach to make their fight more comprehensive.

DM: You said you are no longer looking for a strategic equity partner for Openserve. What is your take on the Competition Tribunal’s decision to block Vodacom from acquiring a co-controlling stake in fibre operator Maziv. Do you think that was the right move? I know you haven’t seen the reasons document yet, but given the talk about the need for consolidation in the fibre market, do you think that this has had a negative impact on the potential for consolidation, and how does the tribunal’s decision affect Telkom?

ST: Let me wear my industry hat to answer that. If we look at what’s happening globally, consolidation in the industry is a trend – and it’s a natural trend. When a deal of this magnitude (Vodacom and Maziv) is blocked – and we don’t yet know the reasons – it certainly does put a dampener on the global investment view of our industry. If you look at industry trends, despite the positive results that we’ve delivered today, if you look at the industry broadly, consolidation is natural.

So, it is an interesting directive that has come from the Competition Tribunal, especially when the communications authority, which is Icasa, approved the deal. Investors may start to question who is the authority that is driving the telecoms industry.

DM: What is Telkom’s thinking around the next spectrum auction, which is scheduled for the 2025/2026 financial year – so, by March 2026? What are you hoping to see from the auction?

ST: The first part is we asked Icasa to do a detailed analysis of the spectrum allocation and competitiveness and competition process flowing from the last auction, which I think Icasa has started – and that’s encouraging. It’s important for Icasa to ask what the desired outcome of that auction was, and whether that outcome was achieved.

Was their intention to extend 5G coverage across the country, and has that been achieved? Because if you look at what happened following that auction, we had severe load shedding and a significant amount of capex, across all network operators, was spent on remedies to deal with it, and the industry still has not received any of the relief from government we have sought, and this hampered the expansion of 5G.

So, when you go out on another auction, expecting the industry to spend billions more, challenged as we are on capex and relatively low revenue growth, what exactly is Icasa seeking to achieve?

The other key element that we also sought to address was whether it was going to balance competition, because that is the key issue that we said Icasa must look to address. It’s not just about embarking on a spectrum auction and what bands we’re hoping to get, but it should also be about addressing the key issue of competitiveness in the market.

DM: The strong growth you’ve seen in your mobile business, which has obviously been data led, would suggest that you are taking market share from your rivals. If so, are you taking it across the board, or is there one specific competitor you’re taking it from?

ST: If you look at the shape of the Telkom Mobile proposition, from the onset, being a late entrant to the market, we built a strong, data-driven proposition. And our customer base is significantly 4G driven. Now, where is the market going to? It is now about customers driving growth into 4G. 3G is now pretty much a thing of the past. Now you have to look at the shape of our organisation versus the competition. Our competitors still have quite a significant portion of 2G and 3G subscribers, and that’s where their growth is still coming from. As subscribers are moving from 2G to 4G, the attractive proposition that they’re seeing in the market is Telkom Mobile.

DM: What about 5G? As far as I know you have not enabled 5G on smartphones yet. What is your strategic plan for 5G?

ST: No, we have enabled 5G, but the key thing for us is the 5G ecosystem is really going to be price driven. 5G devices are still quite expensive, and we strongly feel that if you look at our 4G proposition, both from an output and a quality-of-service perspective, it is still exactly what customers want. Right now, the people who are making money from 5G are your suppliers of equipment, so your Huaweis and Nokias. As the 5G ecosystem becomes more pervasive and the cost for the end user comes down, that’s where you’ll start seeing the growth and output. But right now, we feel that the proposition that we have in 4G really meets customer demands, and particularly from the end-user device perspective.

DM: I know you’re moving to get off legacy copper and ADSL as quickly as possible. Where do you stand with that transition? How many ADSL customers do you still have on your network? And at what point are you going to switch off or decommission your copper network entirely?

ST: ADSL is just under 70 000 remaining, and a big portion of that rests in government offices. And what’s been encouraging about that is we renewed our government contract through the State IT Agency (Sita), so in the next four to five years – and we want to do it much faster – we’ll migrate a significant portion of those offices from legacy copper onto fibre. In Openserve, 81% of our revenue is now sitting on fibre or our next-generation platforms. In the next 18 months, as we execute on that Sita contract, it’s about covering over 6 000 offices nationally. It’s a massive project of upgrading and moving those offices from legacy infrastructure to fibre.

DM: It sounds like in the residential market, ADSL is already basically dead.

ST: Yes, it’s very small. And where there’s copper theft, we do not replace the copper anymore. We then move customers to LTE.

DM: Lastly, you have said previously that you hope to resume dividend payouts, which were suspended back in 2020. Are you on track to do that?

TS: We reinstated the dividend policy, but the payment of a dividend will be determined by the board and the priorities for the business in terms of what the internal capex requirements are. So, we’ve not finalised whether we pay the dividend at year-end, but we’ve reinstated the policy and any payments will be strongly based on the level of free cash flow.  – © 2024 NewsCentral Media

Pieter Uys, chairman of fibre operator Maziv, has sharply criticised the Competition Tribunal’s decision to block Vodacom’s acquisition of a co-controlling stake in the company, saying the call “makes no sense”.

Uys, who also holds a senior leadership role at Maziv investor Remgro and who is a former CEO of Vodacom Group, was speaking to Sunday Times journalist Chris Barron in an interview published on Sunday (paywall). He told Barron that the tribunal’s rejection of the merger makes a mockery of government assurances to investors that South Africa is open for business.

On 29 October 2024, the tribunal surprised the merging parties, which had agreed to a range of conditions they believed would have allowed the deal to proceed, by announcing it would side with the recommendation of the Competition Commission that the deal be blocked on competition grounds. The tribunal has not yet provided the reasons for its decision.

The process at the competition authorities has taken three years, a lifetime in the technology industry and a delay that has been roundly criticised not only by those who supported the transaction but also by those who were opposed to it.

The move is seen as a devastating blow to Maziv and its shareholders, which had planned to use the proceeds of the Vodacom investment to plough R10-billion or more into the deployment of fibre networks in underserviced parts of South Africa, including townships. The decision could also halt consolidation in the industry that had been expected to follow the merger.

Uys told the Sunday Times that the tribunal’s decision is “not the message we want to send out to the world”.

“The president (Cyril Ramaphosa) stands up every year and says he’s calling industry to commit to infrastructure investment. This is a perfect example of infrastructure investment, and the public interest benefits we’ve committed to make it a no-brainer,” Uys told Barron.

‘Too long’

He also lambasted the competition authorities for the time it took them to consider the merits of the transaction. “To leave companies that want to invest billions in the country in limbo for three years like the competition authorities did, is just too long, it’s unacceptable,” said Uys.

Vodacom Group CEO Shameel Joosub previously described the tribunal’s decision to prohibit the merger as “deeply surprising and disappointing”.

Read: Vodacom and Maziv: a contrarian viewpoint

Vodacom said even the department of trade, industry & competition, which has oversight of the competition regulators, had supported the merger. This was based on the merging parties committing to:

• Investing at least R10-billion over a five-year period, predominantly in low-income areas;
• Passing at least a million new homes in lower-income areas over a five-year period;
• Creating up to 10 000 new jobs;
• Establishing a R300-million enterprise and supplier development fund to prioritise the development of small businesses;
• Providing high-speed internet to over 600 adjacent schools and police stations at no cost; and
• Vodacom investing up to R14-billion into South Africa through the transaction.

“I am deeply surprised and disappointed by the tribunal’s decision. South Africa desperately needs additional significant investment, especially in digital infrastructure in lower-income areas,” said Joosub.

“Our investment of up to R14-billion would have changed millions of lives and created thousands of jobs. This comes after the concerns of our competitors, involved in the competition hearings process, and the department of trade, industry & competition were comprehensively addressed through remedies and commitments by the parties,” he said.  — © 2024 NewsCentral Media

 

 

 

Telkom continues to deploy its data-led strategy, says the firm.

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Telecommunications company Telkom has increased its revenue by 1.9% to R21.3 billion, with mobile service revenue increasing by 10% and fibre data service revenue going up by 15.5%.

The JSE-listed Telkom today announced its interim financial results for the six months ended 30 September.

Subsidiaries BCX and Openserve also posted strong results during the period. According to Telkom, BCX’s IT services revenue increased by 1.9%. Openserve’s fixed broadband traffic increased by 28.5%, while group fibre data service revenue increased by 15.5%, says the firm.

Telkom’s group adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) went up by 18.3%, to R5.6 billion, demonstrating improved operating leverage.

It posted group adjusted EBITDA margin of 26.2%, a 3.6% increase from the prior period, reflecting ongoing broad-based cost optimisation initiatives, says the group.

Free cash flow remained positive at R768 million, benefiting from strong operating cash generation, it adds.

The balance sheet strengthened, with interest-bearing debt reduced by R885 million to 1.3x net debt to adjusted EBITDA, down from 1.8x as at 31 March 2024.

Serame Taukobong, Telkom group CEO, says the interim results show consistent execution of the data-led strategy driving further profitable growth.

“The results for the six months ended 30 September 2024 demonstrate a robust and steady underlying operational performance, building on the progress made in the previous year,” says Taukobong.

“We continued to monetise our diverse infrastructure asset base to build a strong cash-generating business for the long-term. Simultaneously, we progressed the disposal of non-core assets to invest in future growth.”

 

 

 

Serame Taukobong, Telkom group CEO.

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He explains that group revenue grew by 1.9%, within guidance, driven by continued strong demand for “compelling” data propositions, with mobile service revenue growing by 10%, fibre data service revenue increasing by 15.5% and IT services revenue up by 1.9%, offsetting ongoing fixed voice and legacy data erosion.

“Our next-generation broadband offerings, enabled by ongoing capital investment in our networks, have positioned Telkom as the best-value mobile network in South Africa. In line with our connect-led strategy for our fibre assets, we maintained a high market-leading home connection rate of 49.7% for the period.

“We continue to deploy our data-led strategy, pivoting from voice, driving data growth and ensuring future-readiness.”

The results show Telkom Consumer’s mobile subscribers are now at 22.8 million, with a 19.6% upsurge in its mobile data subscriber base to 14.6 million. It adds that mobile data traffic increased by 25.7%.

Gyro progressed on the disposal of the masts and towers business, Taukobong adds, noting the company received proceeds of R204 million from the disposal of non-core properties.

“While we face challenges, such as high unemployment rates and the need for economic growth to support our connectivity businesses, we are encouraged by positive signs in South Africa, including lowering interest rates and moderating inflation,” he states.

“Looking ahead, the strength of our balance sheet remains a top priority, ensuring we stand resilient in the face of challenges. We will endeavour to maintain into the second half of the year the good momentum we have experienced so far, which is pointing towards a sustained trend of positive free cash flow.

“It is important to emphasise that our focus on efficiency drivers is not solely about reducing workforce numbers, but rather about optimising performance across the board. We are actively reshaping the business construct without compromising our core strengths,” Taukobong concludes.

Communications minister Solly Malatsi has rubbished suggestions that his relationship with his deputy, the ANC’s Mondli Gungubele, has soured over the withdrawal of the controversial SABC Bill.

Gungubele has conducted a number of media interviews in recent days in which he has slammed the minister, a senior Democratic Alliance MP, over his decision to withdraw the bill – a move that has been widely welcomed by the broadcasting industry and civil society groups.

Gungublele lashed out at Malatsi following the bill’s withdrawal, arguing that although finding a sustainable financial model for the public broadcaster is important, Malatsi should have used parliamentary procedures to amend the bill instead of withdrawing it completely. The bill was introduced by Gungubele when he was still minister of communications.

“The relationship [between the deputy minister and me] is still workable,” Malatsi told TechCentral in an interview in Cape Town this week.

“There will be moments where you see things differently and those moments are natural. It has happened before, even with people that come from the same party. The most important thing is, nothing is beyond persuasion.”

Malatsi emphasised that he and Gungubele are still on speaking terms, adding that “sometimes relationships grow stronger when those involved find ways to navigate differences”.

But the withdrawal of the bill has ruffled feathers outside the department and is now threatening the stability of the government of national unity. On Wednesday, minister in the presidency Khumbudzo Ntshavheni accused Malatsi of acting unlawfully in withdrawing the bill.

‘He cannot withdraw it’

Speaking to journalists on Wednesday, Ntshavheni said: “It’s not a private member’s bill, it’s not Mr Malatsi’s bill. It’s a bill of cabinet and the executive, so in terms of the law he cannot withdraw it without coming to cabinet to agree for its withdrawal.” But Malatsi insisted there is “nothing illegal that we have done”.

According to him, the SABC, as public broadcaster, is too important to the nation for matters of expediency to supersede the process of finding a proper solution to the corporation’s funding crisis.

Read: Withdrawal of bill puts SABC at risk of collapse: Diko

Gungubele, on other hand, argued that the bill gave the minister more than enough time – three years to be exact – to come up with a suitable funding model without the need to withdraw it from parliament.

But in a September presentation to parliament’s portfolio committee on communications & digital technologies, SABC CEO Nomsa Chabeli said the development of a funding model for the ailing public broadcaster “must be expedited” if the SABC is to survive.

Chabeli called for “interim mechanisms” to help solve its funding crisis. Among the funding mechanisms she wants are a “device-independent levy”, the enlistment of the South African Revenue Service and MultiChoice Group to collect these levies, and even preventing citizens from subscribing to streaming services like Netflix without a TV licence.

In his interview with TechCentral, Malatsi was unclear about how long the process to amend the bill will take, giving no direct response to whether it will be tabled in parliament in the current financial year as parliamentary portfolio committee chair Khusela Diko – who has also criticised Malatsi’s decision to withdraw the bill – hoped it would be.

“We have to get the question around the funding model for the SABC right. There is broad acknowledgement that the bill as it stands does not answer that, so why proceed with it…?

“I just want make sure that I am confident that the interventions we are putting in place about the financial future of the SABC are actually credible and that they will help address the fundamental situation that we face right now,” said Malatsi.  – © 2024 NewsCentral Media

 

 

 

John Mc Loughlin, CEO, J2 Software. (Image: J2 Software)

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While consumers are no strangers to phishing e-mails, fraudulent SMS messages and social media scams, the scale and complexity of cyber attacks aimed at critical sectors go far beyond these relatively simple threats.

Entire industries and governmental bodies face increasingly sophisticated attacks, which can cripple essential services, cause economic damage and compromise sensitive data on a massive scale.

Understanding the sectors most frequently targeted by cyber criminals can offer insights into the breadth and nature of these threats, highlighting the need for vigilance, investment in security and proactive measures.

According to data from the European Repository of Cyber Incidents (ERCI), critical infrastructure – facilities and services vital to the functioning of society – has become a prime target for cyber criminals. These infrastructures span everything from healthcare and finance to telecommunications and energy.

Let’s dive into the key sectors targeted by cyber crime, and take a closer look at the various cyber security challenges.

Critical infrastructure is the lifeblood of modern society, providing essential services that people rely on daily. This makes it an attractive target for cyber criminals, who seek to disrupt, steal or hold these services hostage in exchange for financial gains or other motives, such as political or ideological agendas.

In 2023, critical infrastructure was the most frequently attacked sector, according to ERCI. These cyber incidents range from ransomware attacks that lock systems until a ransom is paid to sophisticated breaches that steal sensitive data or cause system-wide disruptions. Statista’s report, based on ERCI data, emphasises just how much damage can be done when vital services come under attack.

Among the sectors of critical infrastructure, healthcare stands out as a primary target. The healthcare industry, which includes hospitals, clinics and other medical facilities, accounted for 14.2% of all attacks on critical infrastructure in 2023. The motivations for targeting healthcare organisations vary but often involve ransomware attacks, theft of confidential patient records, and disruptions to healthcare services.

Ransomware is a particularly devastating tool in the arsenal of cyber criminals targeting healthcare organisations. Attackers encrypt essential systems and files, demanding hefty sums to restore access. For healthcare providers, the stakes are incredibly high – lives can literally hang in the balance. The disruption of care services, delays in medical treatment and the potential exposure of personal healthcare information create a nightmare scenario for both patients and healthcare administrators.

One recent high-profile example involved the Clop ransomware gang, which targeted hospitals and healthcare organisations by exploiting vulnerabilities in widely-used file transfer software. This attack paralysed hospital operations, forcing many to delay patient treatments or turn away non-emergency cases.

The financial sector also remains a lucrative target for cyber criminals, accounting for 8.3% of attacks on critical infrastructure in 2023. Financial institutions such as banks, insurance companies and investment firms are natural targets because of the vast sums of money they manage, as well as the wealth of sensitive data they store.

Cyber attacks in this sector can take multiple forms, including:

• Phishing attacks aimed at obtaining login credentials for online banking or investment platforms.
• Distributed denial of service (DDOS) attacks that overwhelm a bank’s online services, making them inaccessible to customers.
• Data breaches that expose personally identifiable information (PII) or financial details, leading to identity theft and other forms of fraud.

For instance, a well-coordinated attack on a large European bank this year resulted in a data breach that exposed millions of customer records. While the bank was quick to mitigate the breach, the reputational damage and financial loss were significant.

The telecommunications, transport and energy sectors also fall within the crosshairs of cyber criminals, with attacks occurring regularly in 2023. These sectors play crucial roles in ensuring that communication networks function, people and goods can move, and societies have access to power and fuel. A well-executed cyber attack against any one of these sectors can have far-reaching consequences.

• Telecommunications companies have been hit by a combination of DDOS attacks, data breaches and ransomware, often targeting critical communication infrastructure or sensitive customer data.
• The transport sector, particularly airlines and rail systems, have seen an increase in cyber attacks aiming to disrupt logistics and operations.
• The energy sector, including utilities providing electricity and fuel, remains a particularly worrying target because of the potential for large-scale blackouts or fuel supply disruptions. In 2023, several European energy companies reported being victims of cyber attacks designed to compromise operational systems and extort ransom payments.

After critical infrastructure, state institutions and political systems are the next most common targets for cyber attacks, according to ERCI, with more than 450 reported incidents in 2023. Cyber criminals, state-sponsored attackers and hacktivist groups have increasingly turned their attention to government systems in pursuit of sensitive information or to sow chaos and disinformation.

State institutions often face spear-phishing campaigns, where government employees are tricked into giving up passwords or access to sensitive systems. Some attacks, particularly those backed by nation-states, aim to infiltrate defence systems, steal military secrets or disrupt diplomatic communications.

Additionally, election interference and politically motivated attacks have continued to plague democratic systems. Countries across Europe and North America have reported attempts to manipulate voter data or spread disinformation during elections. These attacks often involve the exploitation of social media platforms and targeted disinformation campaigns designed to sow discord among the population or influence voting behaviour.

With the relentless rise in cyber attacks, organisations and governments have been forced to adopt stronger cyber security measures. The cyber threats facing critical infrastructure and state institutions have necessitated the following key strategies:

• Enhanced endpoint security: With more devices connected to corporate and institutional networks than ever before, endpoint security is becoming a central focus. Advanced endpoint protection tools, powered by machine learning and AI, can detect and stop threats before they reach sensitive systems.
• Zero trust architecture: As cyber attacks grow more sophisticated, many organisations are adopting zero trust models, which assume that no user or device –internal or external – can be trusted by default. Access is only granted after careful authentication, and users are continually monitored to ensure they pose no risk to the system.
• Backup and disaster recovery: For sectors like healthcare, where service disruption can be catastrophic, ensuring regular data backups and establishing robust disaster recovery plans are essential. Many ransomware victims have been able to recover more quickly thanks to having secure backups in place.
• Cyber security awareness training: Human error continues to be a major vulnerability. Ongoing training programmes help employees recognise phishing attempts, social engineering and other tactics used by cyber criminals.

The increase in cyber attacks on critical infrastructure, state institutions and political systems is a stark reminder that no sector is immune to the rising tide of cyber crime. As attacks grow in frequency and sophistication, organisations must bolster their cyber security defences with proactive measures.

Whether through enhanced technology, stricter access controls or comprehensive employee training, businesses and governments alike must stay vigilant to mitigate the ever-evolving threats posed by cyber criminals.

This serves as both a wake-up call and a roadmap for how industries can protect themselves against increasingly dangerous digital threats.