Telkom profit slumps 36%

Johannesburg - Fixed-line operator Telkom [JSE:TKG] reported a 36% drop in first-half profit on Monday, as the former state-run utility continues to struggle with tough competition and burdensome costs from its new mobile arm.

Telkom, which is in talks to sell a 20% stake to South Korea's KT Corp, said headline earnings from continuing operations totalled 191.7 cents per share in the six months to end-September, compared with a restated 297c a year earlier.

Including discontinued operations, headline earnings fell by nearly 84%.

Operating revenue totalled R16.4bn, down 3.2% from a year earlier, the company said.

It said it expects capital spending to total as much as 20% of revenue for the year.

Telkom, which is nearly 40% owned by the government, has been fighting to rein in costs and return to growth, hit by the decline in traditional telephony and a costly failed expansion plan in Nigeria.

It is focusing on its new mobile unit as a part of plan to become a fully "converged" telecom operator, offering mobile, fixed-line, broadband and wireless internet.

It finalised the sale of its Nigerian unit in October, for a net loss of R1bn. That loss is due to be booked in the second half of the financial year.

Telkom also said in October it was in talks to sell a 20% stake to South Korea's second-largest mobile operator, KT Corp, for around $600m.

Telkom shares are down nearly 22% so far this year, compared with a 1% decline in Johannesburg's All Share [JSE:J203] index.