Telkom's profit cut in half as calls slide
June 23, 2009
By Nicky Smith
TELKOM South Africa's earnings fell 48 percent on a loss at its Nigerian unit, Multi-Links, and lower voice traffic revenue in the year to March.
Net income declined to R4.17 billion, or R8.20 a share, the fixed-line telecoms utility said yesterday. Revenue rose 6.9 percent to R36.4bn.
Telkom is expanding operations beyond South Africa, where its fixed-line revenue is falling. It said the strategy to offer voice and data services in faster-growing African markets "has been challenging given the high start-up costs, unknown and competitive markets, infrastructure and technology challenges, skills requirements and volatile currency… markets".
These difficulties were reflected in impairment charges, foreign exchange losses and reduced fair value, Telkom said.
Operating losses impaired investments in Multi-Links and Africa Online by R462 million and R39m, respectively.
Voice traffic revenue fell 3.9 percent to R15.3bn. Local minutes dropped 22 percent to 8.8 billion minutes.
"This is primarily due to continuing fixed to mobile substitution," the company said.
Jan Meintjes at Gryphon Asset Management said there was still uncertainty in terms of the earnings profile of the stand-alone business.
"The business is under… stress and we need to see the fixed-line strategy to find out how they expect to turn it around. Multi-Links was also disappointing," said Meintjes.
Telkom rose 0.7 percent to R35.25 yesterday. - Bloomberg, with additional reporting by Sapa and Thabiso Mochiko
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