Telkom shares were trading up by more than 5% in lunchtime trading on the JSE on Thursday after issuing a positive earnings update.

For the year ended 31 March 2014, Telkom said it expects basic earnings per share from continuing operations to be between R29,72 and R34,28 higher than the restated basic earnings for the 2013 financial year.

Headline earnings per share from continuing operations are expected to be between R7,72 and R7,89 higher than the restated numbers for 2013.

Telkom said the the main drivers of the increase in earnings are a net curtailment gain recognised on its post-retirement medical aid liability of R2,2bn and associated tax benefit of R246m.

There is also a net positive impact from the decrease in mobile termination rates in March 2013, Telkom said. In addition, measures to cut costs have also helped.

Finally, there was lower depreciation as a result of the once-off, R12bn impairment in 2013.

The 2013 results were negatively affected by the impairment, as well a R592m provision for fines levied on Telkom by the Competition Commission for past anticompetitive abuses.

The 2013 numbers were also affected to the tune of R434m due to costs associated with voluntary severance and early retirement packages.