The problem with Telkom lies not in what it says, but in what it has not said.
Analysts are grumbling that at its recent results presentation the company did not provide much clarity about how it would replace the income it lost in the disposal of its shares in Vodacom, or about its plans to go into mobile.
When asked where the group's growth would come from, its CEO, Reuben September, spoke about the R20bn investment it had made in a "new generation" telecommunications network and how this would be the engine of the group's growth.
The problem is, September does not spell out specifically how this investment will generate business.
Telkom's entry into the mobile market brings it into a sector that has an annual revenue of R60bn and is dominated by MTN and Vodacom. With revenue from its fixed-line service flattening and its Multi-Links operation in Nigeria under pressure, going into the mobile space is seen as central to the group's growth.
It planned to launch its mobile service in November, but now it says this will be coming out only in February. The delay means Telkom is missing the chance to cash in during the lucrative festive period, says Birgitta Cederstrom, the ICT programme manager for Africa for research and consulting firm Frost & Sullivan.
"It's a bit of a warning sign that they do not want to give too much detail on their expansion into mobile telecom s, as it means they might not have thought it through properly," says Kate Turner-Smith, ICT analyst at Vunani Securities.
Telkom wants to expand further into Africa as well, but it has yet to find success across the border. It had to write down R2,14bn from its Multi-Links operation and has yet to conclude a deal in Zambia, where it's in talks to buy Zamtel. It has also set its sights on Zimbabwean operator TelOne.
Then there is the matter of the supreme court of appeal's ruling that the competition commission has jurisdiction to rule on competition issues involving Telkom. This ruling means Telkom may face a hefty fine for anti competitive behaviour.
While Telkom struggles to find its way, another local telecom company looks as if it's gaining ground. Dimension Data (Didata) resells computer and networking hardware, but has increasingly moved into the telecom space and has become a fierce rival to Telkom by offering voice and data services to businesses. It even expects to offer mobile phone services in the next year or so.
The deregulation in the telecom sector that Didata has always longed for enables it to compete on a fairer footing. For years it has had to use Telkom's infrastructure, all the while competing against it. Now that it has its own networks it does not have to piggyback off a partner it does not trust.
The recession has hurt all the telecom companies, but judging by its results Didata is in many ways in better shape than Telkom. At least it s operating margins are going in the right direction, rising from 4% to 4,9%, while Telkom's fell to 27,3% from 32,3%. "[Didata] looks very, very good. It has not posted a drop in profit and has costs under control," says Cederstrom.
It has taken a long time for Didata to get itself into this position. For the past eight or so years it has been working on reinventing itself after it was knocked when the tech share investment bubble burst in 2000. The group had expanded too quickly and got caught up in the hype of the time.
It has had to go through a difficult restructuring and is now a lean and focused business.
Another difference between Didata and Telkom can be seen in their outlook. Didata is confident, and speaks of hitting the "sweet spot" by tapping into trends like deregulation of the SA telecom sector.
In contrast, the words outlook and prospects don't even appear in Telkom's results. September and Telkom chief financial officer Peter Nelson did, however, buy R1,5m shares in the group after it released its results - a show of confidence in the company.
For now, Didata looks like a better bet than its larger rival. "I think this is the second coming of Didata," says Cederstrom.
Ranking the Analysts 2009
