• SABC shenanigans

    SA has already embarked on a slippery slope to autocracy, warns Terry Bell in Inside Labour.

  • Zim tastes people power

    Protests in Zimbabwe are forcing Mugabe to face anti-government sentiment, says Memory Mataranyika.

  • Platinum handshake

    Officials who try to do what's right risk far more than blessed wrongdoers, says Solly Moeng.

All data is delayed
Loading...
See More

Moody’s warns on Telkom fine

Aug 13 2012 13:37
I-Net Bridge
Johannesburg - The Competition Tribunal’s R449m fine on Telkom [JSE:TKG] for abusing its dominance in the telecommunications market is credit negative as it will reduce cash flow and increase leverage for fiscal years ending March 2013 and 2014‚ ratings agency Moody’s warned on Monday.

The tribunal fined Telkom last week‚ but the fine was well below the Competition Commission’s recommended R3.2bn.

“The penalty also comes amid depressed operating performance over the past 12 months‚” Douglas Rowlings‚ associate analyst at Moody's‚ said.

The tribunal found that between 1999 and 2004 Telkom had refused to supply essential services to independent value-added network services (VANS) providers and induced customers to not deal with these VANS providers.

Moody’s said the penalty‚ assuming Telkom did not appeal the judgment‚ would result in the company paying R224.5m in the next six months‚ and another R224.5m in 18 months.

Telkom plans to spend R7.5bn in capital expenditure in the next financial year.

“With a cash balance at March 31 of R1.168bn (plus another R2.025bn on call from repurchase agreements‚ and free cash flow for the 12 months ended in September 2011 of R3.196bn‚ the fine payments and capex will erode the company’s liquidity and increase leverage‚” Rowlings said.

The ratings agency estimated paying the total fine would add pressure on the ratio of net debt to earnings before interest‚ depreciation‚ taxes‚ and amortisation (ebidta).

“Management’s ability to stabilise the continuing downward trajectory of Telkom’s ebidta margin and interest coverage will be an important measure of the effectiveness of its turnaround strategy‚” Rowlings said.

Telkom‚ Moody’s noted‚ had struggled to stabilise its business amid revenue losses and margin compression owing to intensifying competition and customers abandoning the company’s higher-margin‚ fixed-line services for mobile services.

The government’s rejection of a proposal by KT Corporation to buy a 20% stake in Telkom would not make things easier for Telkom‚ Moody’s noted.

*Follow Fin24 on Twitter, Facebook and Google+.

 

NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Comments have been closed for this article.
 

Company Snapshot

We're talking about:

THE SAVINGS ISSUE

Saving can make a lot of things possible, but we all know how hard it is to save. This special Savings Issue will help you get focused.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Sarb's decision to keep the repo rate unchanged is:

Previous results · Suggest a vote

Loading...