Crunch time at Telkom as profits plunge - TechCentral

Crunch time at Telkom as profits plunge

Telkom Lucasrand

It was a bad Friday the 13th for Telkom investors. The fixed-line telecommunications operator warned on Friday that its interim profits in the six months to September would take a big knock because of poor performance in its key markets of SA and Nigeria.

The SA business experienced margin pressure, Telkom said. This was as a result of “higher than inflation increases in operating costs mainly as a result of:

  • Higher payments to local and international operators;
  • Salary increases as a result of the agreement reached with trade unions;
  • High depreciation; and
  • Increased provision for inventory write-offs.

In Nigeria, Telkom’s Multi-links subsidiary continued to haemorrhage. The group blamed the poor state of the Nigerian economy, pricing pressures, and a short-term strategy to reduce inventories and acquire subscribers by subsidising handsets.

“Average revenue per user remains low in an intensely competitive market,” Telkom said.

The group said it expected to post once-off profits associated with the sale and unbundling of its 50% stake in cellular operator Vodacom.

However, with the effects of the Vodacom deal stripped out, it warned that basic earnings per share would fall by between 130% and 140%.

Normalised basic earnings per share from continuing operations would decrease by between 45% and 55%.

Telkom is expected to publish its interim results on 24 November.  — Staff reporter, TechCentral

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