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Telkom results show business challenge

Jun 08 2012 14:29 Sapa

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Johannesburg - Telecommunications group Telkom on Friday admitted its results reflected the challenges it faced, but said it had a growth strategy in place.

Operating revenue for the year to March decreased by 0.7% to R33.1bn.

Operating expenses increased by 6.1% to R31.3bn.

Earnings before interest, tax, depreciation and amortisation (Ebitda) dropped 8.8% to R8.5bn.

Profit before tax was R774m.

Profit for the year was posted at R179m.

"This has been a challenging year and a challenging week," said Telkom CEO Pinky Moholi.

During the year, Telkom's management had focused on crafting a strategy that recognised its core competency, its role in society, and future growth opportunities.

The results included a R896m loss from the disposal of Telkom's business in Nigeria.

It also included a R596m impairment loss of iWayAfrica's goodwill and assets.

"It has been a difficult year, but one that was necessary for the future stability of the group," Moholi said.

"We've done better than some expected us to do."

Telkom's traditional fixed-line business continued to decline. Fixed-line traffic decreased by 8%.

The drop in fixed-line revenue held at 2.8%, despite declining traffic volumes and pricing pressure.

"The decline in voice revenue is not as steep as in other years," Moholi said, adding that this decline would continue.

To address this trend, Telkom needed to focus on converting these subscribers to broadband and to its own mobile network.

Telkom chief financial officer Jacques Schindehutte said the company needs to reposition itself for growth in the areas of data and mobile.

"This is where our future is, and where we are directing our investment spending," he said.

Data currently contributed 31.8% of Telkom's revenue.

Mobile contributed just 3.6%.

But within four years, these two segments should contribute 50% of Telkom's revenue, he said.

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