Vodacom profits as investor concerns weigh on Telkom

Shares in Telkom (TKG) declined in afternoon trade on the JSE, with rival mobile operator Vodacom (VOD) benefitting as investors looked to reshuffle their portfolios ahead of the outcome of Telkom’s abuse of dominance case expected Wednesday (15, February).

The Competition Commission asked the Competition Tribunal that Telkom be fined 10% of its earnings, or R3.5 billion, for abusing its dominant position in the telecoms market by charging excessive prices.

In June, Telkom announced normalised operating revenue down 5.2% to R33.4 billion for the year ended March 2011.

By 16:19, shares in Telkom waned 68 cents or 2.41% to R27.52, while Vodacom climbed R1.85 or 1.83% to R102.98 on the local bourse.

Drikus Combrinck, Portfolio Manager at PSG Konsult told BusinessTech: “It’s a case of investors pulling out of one (Telkom), and moving into another (Vodacom). Investors want to remain in telcos, and see better value in one over the other. That is the simple reason.”

He pointed to the potentially large material impact facing Telkom should the tribunal rule against it. He said that a R3.5 billion fine could have a R6.70 per share impact on the group, based on approximately 520 million shares in issue as at September 2011.

He added that a fine of that size could also squeeze the group’s ability to effectively continue the roll-out of 8.ta, its mobile arm amid cash flow constraints.

“If Telkom is fined anywhere near that figure (R3.5bn), you will see huge losses for Telkom, far bigger than R6.70,” he said.

Vodacom meanwhile On Wednesday (8 February 2012), announced record customer growth and a 12.2% rise in group revenue for the quarter ended December 2011, to R17.997 billion.

Vodacom highlighted record net customer additions of five million in the quarter, with group customers up 27.3% to 52.9 million.

It noted a 41.2% increase in group active data customers to 13.8 million and data revenue increased 23.8% to R2.082 billion.

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Vodacom profits as investor concerns weigh on Telkom