Vox warns on lower call rates

2010-11-17 15:15

Johannesburg - Vox Telecom [JSE:VOX] advised on Wednesday that it expects to report headline earnings per share  of between 6.18 cents and 6.80c for the year ended August 31 2010, from 6.18c previously.

It expects to report a basic loss per share for the period of between 60.77c and 61.87c/share, from basic earnings per share of 5.49c earlier.
"The expected basic loss per share will be as a result of impairments to goodwill and intangible assets amounting to R749m."

Since the last fiscal year, the Independent Communications Authority of South Africa has proposed significant changes to wholesale interconnection rates to be implemented via a glide path over several years.

"The first drop in interconnection rates was implemented on March 1, 2010 and the company has based its assumptions on the future reductions in interconnection rates as communicated in recent statements by Icasa," Vox said.
As a result of these changes, the company said it had valued the least cost routing (LCR) business based on management's best estimate of the effect these changes would have on future cash flows.

In addition, the company also valued certain consumer ISP intangible assets based on expected future cash flows to be received through its subsidiary @lantic Internet, which does not relate to changes in interconnect rates.
"The net effect of this valuation process is that a portion of the goodwill and intangible assets attributable to these cash generating units are (sic) being impaired, the majority of which lies within the LCR business," it said.

Headline earnings are not affected by the impairments to goodwill and intangible assets.

The firm expects to publish its results on about November 24, 2010.