Telkom's first-half profit plummeted, the fixed-line phone company said on Monday.

Headline earnings per share from continuing operations decreased by 37.9 percent to 242.2 cents for the six months ended 30 September 2009, the group said in a statement.

The impact of competition and the weaker economic environment were evident in the results, Reuben September, chief executive officer said.

"Our strategy seeking to re-position the Telkom Group is imperative given the tough operating environment.

"Similar to the strategies of other leading operators in the world, we are focusing on growing other revenue streams to compensate for the decline in fixed voice revenues."

Expand into other markets

September said Telkom was expanding into other geographic markets and into other domestic markets, "for example our data centre operations and mobile strategy."

He said the group was improving its execution in current growth markets.

In addition, Telkom was strongly focused on reducing its costs to protect its profits.

"We remain committed to a ten percent reduction in operating expenses by the 2011/12 financial year.

"While control of discretionary expenditure is showing immediate reduction, other areas under focus require careful planning and execution to ensure long-term success."

These areas included supplier negotiations, improved inventory management, IT costs, maintenance costs and synergies through mobile capabilities and data centre operations.

Telkom Renaissance

September said the Telkom Renaissance initiative, dealing with the remodelling, reorganisation, revitalisation and re-engineering of Telkom was gaining traction "and we have achieved important milestones."

The reorganisation of Telkom South Africa into new business units was 85 percent complete, September said.

Specific work streams were focused on business process engineering and cost efficiencies.

He said the business plans for both the mobile strategy and data centre operations had been approved by the board of directors after extensive market research.

According to September, Telkom's Nigerian business Multi-Links remained a major concern, but was beginning to show slight improvements in its operating performance.

He said the integration of Africa Online and Mweb Africa was proceeding well.

"Despite the difficulties, the commitment of my team to positioning Telkom to aggressively compete in the South African and African markets is gaining momentum," September said.

The group's data centre operation, branded Cybernest, was launched on November 19.

Long-term process

"This initiative is further evidence of our drive to diversify and grow our revenue streams and take costs out of our current operations.

"Free cash flow generation is critical to the valuation of Telkom and everything we are doing is aimed at this target."

September said the process was a long-term one, requiring harsh reviews of the group's capital expenditure programme and business processes.

"I am confident that the strength inherent in the fixed-line network and the business leadership and operations skills of our employees will allow us to offer our markets simple, quality, cost effective services that will be competitive in our markets," he said.

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