Telkom profit slumps 35%

2011-06-13 07:50

Johannesburg - Telkom [JSE:TKG]  reported a 35% drop in full-year profit on Monday, hit by expenses from from its new mobile venture and job cuts, and warned it needed to get tougher on costs.

Africa's biggest fixed-line operator said normalised headline eranings per share for the year to end-March totalled 444.9c, compared with a restated 686.7c a year earlier.

The results outstripped an average estimate of 408c in a poll of 13 analysts by Thomson Reuters.

Operating revenue fell 5.2% to R33.4bn, while earnings before interest, tax, depreciation and amortisation dropped by 11%.

Telkom said last month it expected to post a 25c to 45c decline in earnings, citing the costs of its new mobile business, 8ta, and severance packages.

It also said at the time it was restating the previous year's results to reclassify its Nigerian unit as an asset for sale.

Hit by the decline in traditional telephony and stiff competition from mobile heavyweights MTN Group [JSE:MTN] and Vodacom Group [JSE:VOD], Telkom has been struggling to rein in costs and turn itself around.

The company said in April it would sell part of its money-losing Nigerian unit, Multi-Links, for $52m.

That process has been delayed by a legal dispute with private equity firm Helios Investment Partners over leases related to telecom towers. A unit of Helios is suing Telkom for around $250m.

Telkom is hoping its new mobile business will provide a much-needed revenue boost, although analysts have said it will likely face a tough battle in the competitive industry.

The company said in February it would offer severance packages to help cut costs. At least 1 650 employees had already taken such packages, a spokesperson for trade union Solidarity told Reuters last month.

Shares of Telkom, which is nearly 40% owned by government, are down about 2.5% so far this year, compared with a 3% decline in Johannesburg's All-share [JSE:J203].

  • neo_acheron - 2011-06-13 08:21

    "... although analysts have said it will likely face a tough battle in the competitive industry." --- Competitive industry? What bull... If you can be a lot better than the 2 "big failures" then they'll make a killing, but with like everything else we just get onto the gravy train and milk the consumer like we used to and provide crappy customer support and even worse service. Why do you think they are not making profit in Nigeria?

  • Lekker Jan - 2011-06-13 08:57

    Great business savvy from the Telkom bosses. Well done boys!

  • william.botha - 2011-06-13 09:07

    A bit tougher now that the playing grounds are getting a bit more level.

  • 50something - 2011-06-13 09:36

    It does not take a genius to work out that 8ta was ill timed and irresponsible. Guess the Telkom consumer will pick up the tab again ...

  • ANC-FTL - 2011-06-13 09:47

    Who didnt see this comming?

  • GJDH - 2011-06-13 10:01

    Maybe its because it takes them 2 months to install their ADSL offer which is a reflection of their productivity??

  • Serias - 2011-06-13 10:52

    Telkom - Majority shareholder, the state, just like Denel, Eskom and SAA. What do all of these enterprises have in common??????

  • amaKK - 2011-06-13 11:08

    Telkom is a has-been. Very few people or businesses for that matter require landlines.

  • A R Soal - 2011-06-13 11:15

    the less i have to do with Helkom the better

  • Wes - 2011-11-21 14:28

    I suppose Telkom is trying to delete negative comments. You might as well just block anyone from making comments at all. You sow poor service you reap poor profits.

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