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SA’s Telkom reveals 80% profit drop

Releasing results for the first half for 2012 today, Telkom revealed an 80.6 percent drop in profits as the shift to mobile puts pressure on the South African operator.

Headline earnings per share (HEPS) – the main indicator of profits in South Africa – experienced a freefall of 80.6 percent to 37.2 cents (US$0.042) across H1 ended September 30, the operator disclosed, down from last year’s equivalent figure of 117.8 cents (US$0.019).

Despite these results, outgoing CEO Nombulelo Moholi insisted: “We are confident that the headwinds we face can be overcome.”

Revenue saw a nominal decline of 1.5 percent, dipping to R16.5 billion (US$ 1.86 billion), from R16.7 billion (US$1.88 billion) for H1 2011.

In further bad news, operating costs increased by 1.6 percent to R15.6 billion (US$19.9 billion).

Moholi glossed over the damning results, commenting only that: “Telkom is engaged in constructive dialogue with its key stakeholders to chart a successful way forward.”

As a 40 percent government owned enterprise – with the state pension fund owning an additional 10.5 percent of the fixed-line operator – the government plays a measurable role in the direction of the company. In this vein, Moholi noted that despite expected policy input from the government, Telkom remains “focused on achieving our current business strategy.”

The CEO – who announced her impending resignation earlier this month – added: “We are taking action to ensure that we execute our strategy to build a stable, healthy company going forward…In line with this commitment, engagement with government and all other stakeholders is critical to charting a successful way forward.”

Telkom has been experiencing significant troubles over recent times as the consumer base in South Africa increasingly shifts to preference of mobile telephony, with fixed-line subscriptions decreasing greatly.

Statistics South Africa released the results of the 2011 Census earlier this month showing that only 14.5 percent of households in 2011 reported ownership of a landline telephone; as compared to 23.9 percent of Census respondents a decade earlier in 2001.

Mobile telephony conversely has experienced a boom in the country, with 88.9 percent of South African households owning a mobile telephone according to the 2011 Census results – a substantial rise from 2001 when mobile use penetration stood at 31.9 percent.

The company in its statement today also blamed a R449 million (US$ 637 million) fine handed down by the country’s Competition Tribunal in early August of this year for its unstable finances; the Tribunal having found the operator in breach of multiple sections of South Africa’s Competition Act – essentially purporting to abuse of market position impacting upon other market rivals.

So far this year, Telkom share prices are down by 47 percent.

Posted in: Telecoms

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