Delays putting Telkom behind competitors

A continual delay by government to decide the future of Telkom is putting the company further behind its competitors in the industry, an analyst has warned.

Having blocked a deal between Telkom and Korea based KT Corp in June, Cabinet asked the minister of communications, Dina Pule, to report back to it about all the options that were available for Telkom, in three months.

That deadline passed at the end of August, and while the DoC insisted that a shortlist of three strategic options had finally been presented to cabinet last week, a spokesperson told media at a post-cabinet briefing that Cabinet did not discuss Telkom’s fate at the most recent meeting on Wednesday, 19 September.

It is not clear when Cabinet will release a statement to outline Telkom’s fate.

Government owns 38.9% of Telkom — 51% if the Public Investment Corporation’s (PIC) stake is included.

Spiwe Chireka, program manager of telecoms at research and analysis firm, the International Data Corporation (IDC) told BusinessTech: “This is another thorn in Telkom’s side that can be avoided. The DoC needs to understand that in a highly dynamic market such as the one we have, time to market on anything is of the essence.

“One can only wonder what additional impact (in addition to a falling share price) delays by the minister will have on Telkom. It is no secret that Telkom needs a cash injection like yesterday, something that KT would have provided, and further delays are putting Telkom further behind its competitors in the industry.”

On Friday (21 September), Telkom dropped an earnings bombshell. The group advised that its headline earnings per share from continuing operations for the six months ending September 2012 was expected to be at least 65% lower than the prior comparative period.

HEPS from continuing operations for the six months ended September 2011 stood at 191.7 cents, 35.5% lower than in 2010.

Telkom advised shareholders that basic earnings per share from continuing operations for the six months ending 30 September 2012 is expected to be at least 45% lower than in 2011.

“The lower earnings are mainly attributable to an increase in the provision for Competition Commission fines relating to transgressions of the company dating back approximately 10 years.”

“The operational performance for the period up to 31 August 2012 has been further characterised by flat revenue and operating cost that escalated just below inflation,” it said in a statement.

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Delays putting Telkom behind competitors