Telkom earnings sink

Telkom on Friday (14 June) reported a 73.2% decline in headline earnings per share to 87.0 cents  in results for the year ended March 2013.

Group operating revenue decreased by 1.7% to R32.501 billion (2012: R33.079 billion).

The decrease is mainly due to lower fixed-line voice revenue, partially offset by an increase in mobile and data revenue, Telkom said.

The board decided not to declare a dividend, as was the case in 2012.

The Board decided to impair the carrying value of the assets of the Group by R12 billion for the year ended 31 March 2013.

After the impairment the net asset value is R34 per share. The impairment takes into account the impact on the financial returns of the Group in light of technology changes, competition from mobile operators and evolving regulatory landscape over more than a decade, Telkom said.

The non-cash impairment charge is excluded from headline earnings per share from continuing operations, which is 237.7 cents lower per share than in 2012.

The decline in headline earnings is largely as a result of the cost of voluntary severance packages and a provision for the Competition Tribunal fine and other legal matters, the telecoms firm said.

The group recorded a profit after tax of R501 million excluding the impairment charge (2012: R179 billion) and an EBITDA of R7.109 million (2012: R8.546 million).

Active mobile subscribers increased 3.4% to 1.5 million with a blended ARPU of R61.47.

Mobile sites integrated increased 47.3% to 1,985, with 651 LTE sites integrated, Telkom said.

The results for the year include a provision of R592 million for the settlement of the long-standing dispute with the Competition Commission and other legal matters and the cost of R434 million for voluntary severance packages.

Employee expenses increased by 14.5% in the year ended March 2013, primarily due to the R434 million cost relating to voluntary severance and early retirement packages, the average annual salary increase of 6.5% and a higher bonus provision.

Telkom said that 1,411 bargaining unit and 178 management employees exited up to 31 May 2013 as part of the process.

Payments to mobile operators decreased 19.5% due to the reduction in mobile termination rates from 73 cents to 56 cents with effect from 1 March 2012.

Telkom CEO Sipho Maseko said: “Despite the current financial performance, there is significant opportunity for Telkom to build a profitable and sustainable business that is able to support South Africa’s economic development.”

“I believe that Telkom is well positioned, through its unique fixed-line infrastructure and network, to facilitate the “e-enablement” of our country on a commercial basis. We remain well capitalised and have a strong financial base to work from,” he said.

“Success will require a complete transformation of the Group. A full strategic review is currently underway focusing on medium and short-term interventions to unlock value. Tough decisions will have to be made, particularly regarding costs and the decommissioning of unprofitable services.”

“Furthermore it is critical for us to put our customers at the centre of what we do to improve our service delivery and enhance their experience. The upgrade of our network, which we will accelerate over the medium-term, will be essential to achieving this objective,” Maseko said.

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Telkom earnings sink