Mergers, Acquisitions and Financial Results

Improved credit vetting and controls had helped Telkom, Africa's largest telephone company, to reduce its bad debt expense to R215 million from nearly R1 billion in 2002.

In its annual report filed with the US's Securities and Exchange Commission, Telkom said it had implemented usage limits based on customer credits, instituted a better collection programme and continued to promote its prepaid fixed-line services.

"However, we cannot assure that bad debt expense and bad write-offs in our fixed-line segment will remain at these levels and will not increase in the future," the company said.

Telkom also said it had paid its directors and members of senior management an aggregate consolidated compensation of about R48 million.

Sizwe Nxasana, the chief executive, was rewarded with an R11.1 million total package for delivering on what the company promised investors during its listing on March last year.

The package includes a performance bonus of about R8.2 million, and basic salary of R1.8 million, pension fund contributions of R242 430 and other benefits of R832 300.

Nxasana's total package in the previous year was only R4 million with a basic salary of R1.5 million.

During the year to March, the company paid its foreign strategic equity partners Thintana consortium R35.6 million for services it has offered to Telkom.

Thintana Consortium, which consists of US-based SBC Communications, was paid about R29.9 million and Telekom Malaysia received R5.7 million.

Telkom said its strategic equity investors had not exercised effective operational and managerial control over the firm since March 2002. Prior to that all important decisions had to be approved by the foreign shareholders.

Telkom said future margins would be squeezed by a reduction in overall average tariffs and market share of its fixed-line business.

Its mobile business, Vodacom, would experience a reduction in its tariffs and market share because of increased future competition in the cellular industry.

It also announced that its net profit and operating revenue could also decline if it is unable to minimise cable theft, and theft of wireless communications equipment and vandalism of payphones.

Telkom fell 70c to R79.80 yesterday, while the telecoms services sector rose 0.64 percent.

Business Report