Telkom shares buoyed by new leadership

Telkom looked to make early gains in morning trade on the JSE on Tuesday (2 April) following the appointment of a new executive team last week.

Mobile operators, MTN and Vodacom also made solid gains, but ICT group Gijima continues to struggle following a very disappointing results announcement late last week.

Shares in Telkom looked to consolidate above the R15 mark on Tuesday, up 1.2% to R15.18  shortly before 10am, having gained 5.5% to R15 on Thursday (28 March) when Sipho Maseko was named as the new Telkom CEO.

The telco also announced the appointment of Dr Brian Armstrong as group chief operating officer.

Nadim Mohamed, investment analyst and partner at First Avenue Investment Management said the ability to monetize Telkom’s substantial broadband assets would be key for the new management team.

Last month, the group rebranded and restructured its mobile arm as Telkom Mobile, incorporating 8ta into it as a “sub-brand”.

He also noted that Telkom’s new mobile strategy would play a leading role in the group’s success moving forward.

“I do like the concept behind the Telkom Mobile strategy and this could be compelling if implemented properly.  It’s not an easy road ahead for Telkom,” he said.

In an interview with the Business Times, Telkom chairman Jabu Mabuza also sought to allay investor fears that government was driving group strategy.

“Telkom is a public, listed company that has got a lot of other shareholders other than government,” said Mr Mabuza.

“Shareholders don’t give companies strategies. Shareholders approve strategies that deliver the return they expect from their investment.”

Government has a 39.7% direct stake in Telkom directly, and an additional 10.6% through the state-owned Public Investment Corporation (PIC).

Vodacom and MTN

Shares in Vodacom and MTN also rose in morning trade on the JSE on Tuesday, having disappointed in recent weeks.

Shortly before 10am, Vodacom gathered R1.72 or 1.57% to R111.62, while MTN garnered R1.52 to R1.63, with both still someway short of their 52 week high of R129.88, and R184.45 respectively.

The All Share Index traded half a percent higher, at 40,069 points.

Analyst Mohamed advised further caution. “Since last year, I’ve been concerned about a price war situation developing in the SA market and its impact on Vodacom and MTN.  We’ve seen this start to accelerate with the many promotions that have been introduced by these operators almost on a daily basis.

He also pointed out that watchdog Icasa’s decision to reduce MTR’s has allowed for more effective competition by smaller players.

“In addition, data which is becoming a commodity now costs as little as 4.8c/Mb. I remember it being closer to 30c/Mb at the beginning of last year.

“This will certainly place pressure on Vodacom’s margin given its reliance on the SA market.  With MTN, we see a similar phenomenon taking place in the rest of Africa as regulator’s become more active in these markets,” he said.

He cited an example in Nigeria of a steep 40% cut in MTRs, effective 1 April, announced last week.  “The regulator has the ability to significantly influence the level of competition within a telco industry and we think that it will become increasing more difficult  to defend existing, sizeable margins as African regulators introduce MTR cuts, number portability, etc,” Mohamed said.

Gijima

Shares in Gijima fell 20% to 12 cents. In publishing its results on Thursday (28 March), for the six months ended December 2012, Gijima reported a 23% decline in revenue from continuing operations.

Revenue from continuing operations was R911 million, down from R1.1 billion in 2011, and the operating loss from continuing operations was R123 million, after a R33 million operating profit. This translated into a loss in headline earnings per share from continuing operations of 11.12 cents, compared with positive earnings of 1.47 cents in 2011.

Gijima said it has decided to raise R150 million by way of a rights offer.

More on tech shares

Sipho Maseko the new Telkom CEO 

Vodacom slides on SA opp concerns

MTN CEO warns Cell C on price war

MTN lifts revenue, ups dividend

MTN defends neutral approach to price war

Vodacom, MTN feel Cell C’s punches: investor

MTRs should be at 10c to 15c: Holdsworth

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Telkom shares buoyed by new leadership