Telkom’s share price has been knocked sharply lower in the last two trading sessions as investors react negatively to the company’s quarterly trading and operational update for the three months ended 31 December 2015, released on Monday morning.
In trading on Tuesday, Telkom’s share price fell by as much as 10,2% at one stage — or near to a 52-week low — as investors digested the update, which included a warning that it would take the company longer than expected to turn a profit in its mobile operation.
At one stage on Tuesday, the counter was trading as low as R53,08/share, though by late afternoon it had regained a little composure, trading at around the R54 mark.
Tuesday’s losses came on top of a sharp decline in the share price on Monday, when it fell by more than 7% from last Friday’s close of R64/share, bringing the losses in two days to more than 15%.
In the quarterly update, Telkom said that its initial expectation that its mobile business would break even by March 2016 had been “tempered by the operating environment and cost pressures”.
“We are, however, confident that we will maintain the current positive revenue growth witnessed in this part of our business,” it said.
Mobile helped offset pressures on the top line from other areas of Telkom’s business in the quarter, the third of the company’s 2016 financial year to end-March.
Active mobile subscribers grew by 22% year on year to 2,6m, delivering average revenue per user of R90,26. Post-paid subscribers grew by 45%, while prepaid subscribers increased by 15%. Mobile data revenue was a highlight of the quarter, climbing by 56% to R417m.
“Our mobile business continued to achieve good growth, with services revenue up by 37% and data revenue up by 56% year on year,” Telkom said.
However, fixed-line voice revenue declined by 5% year on year to R3,6bn, while broadband digital subscriber lines increased by a modest 3% to just over a million.
Fixed data revenue, excluding leased-line revenue, increased by 5%.
Group net revenue rose by by 7% to R7,2bn for the three months, though operating expenses (up by 13%) and capital expenditure (up by 22%) far outstripped growth at the top line. Without IT acquisition Business Connexion included in the numbers, net revenue fell by 0,3%.
Telkom said the weak economy, the poor state of the rand, higher interest rates and rising inflation have created a “challenging” outlook.
“We expect continued weakness in the economy and anticipate that our customers will migrate to cheaper packages or delay spending on new infrastructure. We will partner with our customers to contain costs as well as take up any opportunities presented by the current environment to grow our business.” — (c) 2016 NewsCentral Media
