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Johannesburg - Management at telecommunications giant Telkom will have to answer tough questions when they face analysts and shareholders at a results presentation on Tuesday, after it reported a fall of 45.9% in earnings per share for its continuing operations.
This figure excludes its former 50% stake in cellular giant Vodacom. It has sold 15% to Britain's Vodafone and listed the remaining 35% on the JSE.
Commenting on Telkom's financial results for the year to end-March, analysts say it was too dependent on Vodacom for its income.
"The losses are a surprise; even with Vodacom out of the mix they're very big. Telkom was buoyed by their broadband products which really took off last year, but there are a host of other broadband suppliers also providing these services now," said Lindsey McDonald, an ICT analyst at Frost & Sullivan.
Tuesday's briefing is expected to include a breakdown of the group's revenues from its three different operating units: South Africa, abroad and its data centre business. This will allow investors a preview of what may happen at these entities.
High start-up costs are also to blame for a sharp increase in operating expenses (19.5% for continuing operations). Multi-Links, a Nigerian-based operator owned by Telkom, reported a net loss of R1.76bn.
Also to be discussed at Tuesday's briefing is the overall success or failure of the acquisitions Telkom has already made in Africa, and its future strategy on expansion on the continent.
Since the sale of Vodacom, Telkom is sitting on a sizeable war chest of about R22bn. According to Telkom SA CEO Reuben September, the group has budgeted capital expenditure of $100 million for Multi-Links' Nigerian expansion.
"Our initiatives in Africa have been challenging given the high start-up costs, unknown and competitive markets, infrastructure and technology challenges, skills requirements and volatile currencies," said September in a statement.
According to McDonald, this year is going to be a reality check for a group which enjoyed being a monopoly and is now dealing with competition in both its local and foreign markets.
"It depends on whether Telkom's quality of service in South Africa can be carried through to the rest of Africa," said McDonald.
- Fin24.com