Competition in SA’s mobile communications industry may be getting tougher, but that isn’t going to stop Vodacom from turning in a robust improvement in earnings in its financial year to 31 March 2011 when it reports results next month.
The JSE-listed group, 65% owned by the UK’s Vodafone, told shareholders on Thursday that it expects headline earnings per share to soar by between 25% and 30% over the previous financial year.
Vodacom, which will publish its full annual financial results on 16 May, expects basic earnings per share to share to climb by between 95% and 105%. However, this spike is largely due to significant net impairment charges related to the group’s acquisition of pan-African telecommunications company Gateway. Those impairment charges amounted to R3,4bn in the 2010 period.
In a sign that Vodacom grossly overpaid in the Gateway deal, it is being forced to write down another R1,5bn in the latest reporting period. The write-down is necessary because of “increased price competition and poorer trading trends”.
Apart from the Gateway problems, Vodacom appears set to turn in a sterling financial performance for the full year. This comes in spite of price pressures in its key SA market, where retail rates are gradually coming down and where regulatory intervention is forcing down the cost of connecting calls between networks.
Vodacom’s share price was trading up 1,3% shortly after it published its earnings update on the JSE’s Sens news service on Thursday. — Staff reporter, TechCentral
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