If you are serious about cutting costs, surely, spending about half of your revenue on paying suppliers is illogical.
That’s what Telkom did last year, according to its report for the year ending March, and is focused on reducing its procurement costs over a three year period. Without specifying the target, Chief Procurement Officer, Ian Russell, briefed investors that it would be “as much as possible”.
Out of revenue of R32.5 billion, it paid 2, 400 suppliers R17 billion, of which 80% was allocated to 23 ‘major’ suppliers. Unsurprisingly, this has been criticised as unjustifiable and lavish.
Business has not been good for the fixed line monopoly, since mobile telephony came to the scene. As mobile phone services are becoming more sophisticated and entrenched, worryingly, Telkom is losing whatever grip it has had on the market – landline usage continues to decline as, apparently, it cannot compete with mobile telephone in terms of convenience. Operating expenses, which have continued to skyrocket, have only worsened its predicament.