Telkom share price takes a knock as profits plunge - TechCentral

Telkom share price takes a knock as profits plunge

Reuben September

Telkom’s first-half profit plummeted, the fixed-line phone company said on Monday. Headline earnings per share from continuing operations decreased by 37,9% to 242,2c for the six months ended 30 September 2009, sending the share price down by as much as 5% in intraday trade on Monday afternoon. The share later recovered to end 1,1% off.

The impact of competition and the weaker economic environment were evident in the results, CEO Reuben September (pictured) said. “Our strategy seeking to reposition the Telkom Group is imperative given the tough operating environment. Similar to the strategies of other leading operators in the world, we are focusing on growing other revenue streams to compensate for the decline in fixed voice revenues.”

September said Telkom was expanding into other geographic markets and into other domestic markets, “for example our data centre operations and mobile strategy”.

He said the group was improving its execution in current growth markets.

In addition, Telkom was strongly focused on reducing its costs to protect its profits. “We remain committed to a 10% reduction in operating expenses by the 2011/12 financial year.

“While control of discretionary expenditure is showing immediate reduction, other areas under focus require careful planning and execution to ensure long-term success.”

These areas included supplier negotiations, improved inventory management, IT costs, maintenance costs and synergies through mobile capabilities and data centre operations.

September said the Telkom Renaissance initiative, dealing with the remodelling, reorganisation, revitalisation and re-engineering of Telkom was gaining traction “and we have achieved important milestones.”

The reorganisation of Telkom SA into new business units was 85% complete, September said. Specific work streams were focused on business process engineering and cost efficiencies.

He said the business plans for both the mobile strategy and data centre operations had been approved by the board of directors after extensive market research.

According to September, Telkom’s Nigerian business Multi-Links remained a major concern, but was beginning to show slight improvements in its operating performance.

He said the integration of Africa Online and MWeb Africa was proceeding well.

“Despite the difficulties, the commitment of my team to positioning Telkom to aggressively compete in the SA and African markets is gaining momentum,” September said.

The group’s data centre operation, branded Cybernest, was launched on November 19.  “This initiative is further evidence of our drive to diversify and grow our revenue streams and take costs out of our current operations.

“Free cash flow generation is critical to the valuation of Telkom and everything we are doing is aimed at this target.”

September said the process was a long-term one, requiring harsh reviews of the group’s capital expenditure programme and business processes.  — Sapa

  • TechCentral will bring you an interview with Reuben September on Tuesday

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