Telkom to take R12bn impairment hit - TechCentral

Telkom to take R12bn impairment hit

Sipho Maseko

Sipho Maseko

Telkom will impair the carrying value of its fixed-line network by R12bn, the JSE-listed telecommunications group said on Tuesday. This will reduce its net asset value from about R57/share to R34/share.

Telkom said last week that its board was considering the impairment.

The board decided on the impairment given the “considerable period of time that Telkom’s shares have been trading at a significantly lower value relative to net asset value” as well as the “returns from some of the legacy assets of the group, which were below commercial norms as a consequence of technology changes, competition from mobile operators and an evolving regulatory landscape”.

Another consideration is that Telkom is migrating away from legacy infrastructure to new technologies, a move that will be accelerated in the next few years and which will further reduce the returns from some of these legacy assets.

“The impairment charge is a noncash item and it will not impact the significant cash flow which the group generates from its operations,” Telkom said in a statement. “It is akin to an accelerated depreciation charge, which has no impact on Telkom’s strong cash position, low indebtedness and ability to fund its capital program from its own resources.”

Basic earnings per share from continuing operations will feel the brunt of the impairment charge, and are expected to be R22,29 to R23,43/share lower for the 2013 financial year ended March 2013.

The noncash impairment charge is excluded from headline earnings per share from continuing operations, which are expected to be between R2,32/share and R2,44/share lower than in the 2012 financial year.

“The decline in headline earnings is largely as a result of the cost of voluntary severance packages of approximately R430m and a provision of approximately R592m for the Competition Tribunal fine and other legal matters.”

“We are committed to transforming Telkom’s financial performance. This will require bold and decisive action. Tough and urgent decisions will have to be made, particularly regarding costs and the decommissioning of unprofitable services,” said Telkom CEO Sipho Maseko in the statement.

“At the same time, we will need to maximise potential profit opportunities. The upgrade of our network, which we will accelerate over the medium term, will be essential for improving our service delivery, efficiency and competitiveness, particularly given our customers’ ever increasing demand for reliable and high speed transmission of data.

“The decision to impair is another important step in this transformation journey. It allows us to draw a clear line between our historic position and our future, enabling us to reset our base to become competitive and efficient.”

Telkom is expected to publish its annual results on Friday, 14 June.  — (c) 2013 NewsCentral Media

Comments are closed.

© 2009 – 2019 NewsCentral Media