Telkom earnings take a hit

2013-04-09 00:00

TELKOM’S full-year headline earnings per share are likely to fall by at least 20%, the struggling fixed-line operator announced yesterday.

In early trade its shares fell nearly three percent to R14.25, compared with a 0.52% rise in the JSE’s All-Share index, Reuters reported.

The full-year results will be published on or around June 14, with the company planning to release an updated trading statement closer to the date.

Telkom said headline earnings per share, which were 324,7 cents in the year ending March 31, 2012, could be about one-fifth lower in the fiscal year just ended.

Jean Pierre Verster, an equity analyst with 36One Asset Management, said Telkom had come under pressure as a fixed-line operator and had taken a knock on data pricing the high costs of DSL and fibre-optic cables.

In addition, its 8ta brand was costing the company a lot of money and was still unprofitable.

Last week, the company appointed Sipho Maseko as its new chief executive.

Maseko has previously served as the managing director at Vodacom SA. His tenure with Vodacom included fulfilling the position of chief operating officer at Vodacom Group.

The expected fall in the company’s full-year earnings could be attributed to not having a coherent business strategy, said Verster.

The company could have acted swiftly to lower the prices of fixed line operations. As it stalled, mobile network operators undercut the company, he added.

The company’s mandate so far had been to ensure accessibility and provide fixed-line options and broadband to rural areas, which has been a problem to achieve due to competition from mobile operators, Verster said.

Also, mobile network speeds were almost similar to that of fixed line options which added to the company’s financial woes.

Telkom has languished in three consecutive years of declining revenue.

Media reports have stated that Maseko’s biggest challenge will be to turn around Telkom’s business in South Africa.


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