Shares in telecommunications company Telkom, dropped by as much as 10% in afternoon trade on Tuesday, following a muted trading update.
On Monday (1 February), Telkom said that group net revenue for the three months ended December 2015, advanced 7% to R7.25 billion, while group operating expenses grew 13% R4.7 billion
Telkom said that fixed voice revenue of R3.6 billion, was down 5%, however, mobile data revenue of R417 million, was up 56%.
The Competition Tribunal of South Africa approved a R2.6 billion merger deal between Business Connexion Group and Telkom, in the second half of last year.
BCX employs approximately 6,700 people in Africa and generates revenue in excess of R6 billion per annum.
Excluding BCX’s operations, Telkom said that group net revenue R6.76 billion was down 0.3%.
“Excluding BCX, our operating expenses remained flat as we benefited from our multiyear
transformation initiatives. We also made progress on the sale of non-core assets during the quarter.”
By 17h15, shares in Telkom traded at R54, down R5.76 or 9.64%. On Monday, shares declined 7% by close of play on the Johannesburg Stock Exchange, having opened at R65.
The current price is close to its 52-week low of R52.71, and down from a high of R85.78, giving the group a market cap of R28.5 billion.
Telkom said that the economic and operating environment has deteriorated driven by lower commodity prices and a weakening rand.
It said that the outlook remains challenging on the back of lower growth expectations, higher interest rates and rising inflation. “Against this backdrop, we prioritised our capital expenditure programme to focus on the growth areas of fibre and LTE,” the group said.
Group capital expenditure of R1.5 billion for the quarter was up 22%.
“We expect continued weakness in the economy and anticipate that our customers will migrate to cheaper packages or delay spending on new infrastructure.
“We will partner with our customers to contain costs as well take up any opportunities presented by the current environment to grow our business,” Telkom said.