Notes to the condensed consolidated provisional annual financial statements
for the year ended 31 March 2014
Subsequent events
Restructuring of the organisation
The Company has been experiencing significant challenges as manifested in the financial underperformance.
The Company continues to experience declining revenues and increasing costs to serve customers.
This makes for an unsustainable financial position.
In response to these challenges Telkom has undertaken a thorough review and investigation into all operations and processes which entailed, among others, looking at issues such as cost drivers and the effectiveness of the organisational structure. By flattening the organisational structure or reducing the number of layers in the structure, Telkom aims to facilitate speedy decision-making and be as close to customers as possible. Telkom aims to manage employee costs down to be competitive in different areas of business.
Telkom identified flattening and delayering its structure as a critical action. Telkom has undertaken a consultation process in line with section 189 and 189(a) of the Labour Relation Act to carry out the proposed delayering.
Acquisition of Business Connexion (BCX)
Telkom announced its firm intention to make an offer regarding the possible acquisition of BCX.
The Company has embarked on a strategy to improve performance and restore profitability.
One of the key considerations of this strategy is to grow beyond its core business of
connectivity by expanding into IT services.
BCX is a leading player in the South African IT services market with strong capabilities in Managed IT Infrastructure, including Data Centres. This proposed acquisition enables Telkom's scale expansion into IT services and helps reinforce the company's core connectivity business. Telkom believes that this combination will create a leading ICT company in South Africa with unrivalled capabilities throughout the country.
The proposed acquisition is in line with the global trend of IT and Telecoms convergence that is driving the development of rapidly changing products and services and re-shaping the overall ICT and Telecoms business landscape. This convergence trend has seen many traditional IT companies merge with telecommunications companies and is fundamental to the strategies of trailblasing companies such as Google, Apple and Amazon. This is the beginning of the process and there are a number of key milestones to attain and work to be done, including approval by the Competition Authorities and the Regulator.
Additional funding
The Company has secured a R1 billion loan to extend its debt maturity profile.
Other matters
The directors are not aware of any other matter or circumstance since the financial
year ended 31 March 2014 and the date of this report, or otherwise dealt with in the
financial statements, which significantly affects the financial position of the Group
and the results of its operations.