South Africa: Telkom's Turnaround Shows Potential for Privatising Tax-Guzzling SOEs

analysis

Unlike state-owned entities, Telkom is soaring and profitable. Although the telecoms group is still partially state-owned, it has managed to fashion a turnaround strategy that continues to pay off. Its success shows the potential to reform SOEs such as Eskom and SAA through privatisation, which might pave the way for their survival and less reliance on state coffers.

As President Cyril Ramaphosa puts the final touches to his soon-to-be announced Cabinet that will be tasked with restructuring bankrupt Eskom and South African Airways (SAA), Telkom continues to prove that privatising and depoliticising an entity could drastically turn its fortunes around.

Telkom's latest financial results show that the telecoms group, which was once wholly owned by the state but is now partially owned, has a lucid strategy for growth in a highly competitive industry. And more importantly, it's profitable.

Telkom grew its earnings before interest, tax, depreciation and amortisation (ebitda) by a better-than-expected 8.5% to R11.3-billion for the year to March 2019. Analysts surveyed by Bloomberg expected ebitda of R10.9-billion.

Profit after tax rose 11.5% to R3.3-billion and headline earnings per share (another measure of profit because it excludes certain once-off items that might boost profits) grew 22.6% to R7.22 over...

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