Telkom rallies to 30-month high
Shares in Telkom lifted to their highest level since 2011 in morning trade on the JSE on Wednesday, after a court ruling on mobile interconnection rates favoured the group in the short term.
Telkom advanced 4.24% or R1.46 to R35.89 on the JSE, a figure it last reached towards the end of 2011, and up from its 52-week worst level of R11.34, reached in May 2013.
Shares in the group show a one-year return of 142%, giving it a market cap of just under R18 billion.
The South Gauteng High Court on Monday (31 March) ruled that new call termination regulations issued by the Independent Communications Authority of South Africa (Icasa) are “unlawful and invalid”.
However, the declaration of invalidity has been suspended for six months, meaning that that the new call termination rates kicked in on Tuesday, 1 April 2014.
Icasa has been given six months to review the regulations.
Among other things, the current regulations cut mobile termination rates (MTRs) to 20 cents per minute, while allowing asymmetry of up to 44 cents per minute.
Under the ruling, for the next six months Cell C and Telkom Mobile will be allowed to charge Vodacom and MTN significantly more to place to calls to their networks than Vodacom and MTN can charge them.
In a note to staff on Tuesday, Telkom CEO Sipho Maseko said that successes achieved over the past year – under extremely challenging circumstances – have reinforced that “Telkom is a remarkable place, with remarkable people”.
In the letter Maseko reflected on his first year at the helm of Telkom, saying that he came to the company recognising that it has “enormous challenges”.
He noted that, while Telkom has had a “few good wins” in the past year, the company has to “face up to a hard truth” as it turns to the next financial year.
“We still need to do a lot more,” Maseko wrote. “We must recognise that we have a challenging year ahead of us, one that will require even more effort from all of us.”
Maseko said that, despite these challenges, efforts to turn Telkom around have already started to bear fruit.
In March, Telkom advised that it expects headline earnings per share for the year ending March 2014 to be at least 20% higher than in 2013.
It also signed an agreement with MTN which will see MTN take over financial and operational responsibility for the roll-out and operation of Telkom’s radio access network (RAN).
The agreement will enable each party to be able to roam on either party’s network.
Telkom expects to publish its annual results on about 13 June 2014.
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