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Ailing Telkom to trim more costs
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22 June 2010
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Fixed-line operator Telkom wants to add more than R2 billion to its operating profit line by cutting costs.
During yesterday's results presentation for the year to March, the company said its operating margins had come under pressure as costs crept up.
Outgoing CEO Reuben September explained that operating costs were higher as it cost more to run Multi-Links, salary increases were above inflation, and Telkom spent more on preventative maintenance.
The telco's operating expenditure grew 8.4 percent, to R32.7 billion, during the year.
As a result, the earnings before interest, taxes, depreciation and amortisation (Ebitda) margin declined to 26.5 percent from 31.5 percent during the previous financial year. Ebitda is a measure of how a company is doing at operational level.
September says the company wants to add another R2 billion to its Ebitda over the next few years by cutting costs. In the year to March, Ebitda was 15.2 percent lower to R9.8 billion.
So far, Telkom has saved R214 million by implementing cost efficiencies across the group.
The company has set out a three-pronged strategy that covers the next three financial years. Telkom wants to improve this measure of operating profit looking at new business models to improve profitability in areas such as its directory services and payphones.
It also wants to outsource the contact centre and optimise its product portfolio across all clients.
So far, it has launched a voluntary retrenchment package for management, the benefits of which will only be seen in the next few years. However, September is confident the company can meet its targets.
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http://www.itweb.co.za/index.php?option=com_content&task=view&id=34204&Itemid=66
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