Telkom's profit plunges

Telecommunications group Telkom’s profit plummeted for the year ended on March 31.

Headline earnings per share had dropped to 46,8 cents for the year under review compared with 610,5 cents a year earlier, the group said in a statement on Monday.

Normalised operating revenue was up 0,7% to R37-billion.

The group’s profit was partially affected by its Nigerian interest Multi-Links which it purchased for $410-million (R3-billion).

“Multi-Links remains a major concern. We have impaired goodwill of R2,148-million and assets of R3,012-million in the current year, bringing the total impairment to date to R5,622-million and thereby fully impairing the goodwill and net asset value.”

The board was considering how best to reduce exposure to risk in Nigeria.

Outgoing chief executive officer Reuben September said the year under review had been “tough” with muted revenue growth.

This was a
result of low tariff increases, intensifying competition and high operating expense growth as a result of inventory write-offs in both Telkom SA and Multi-Links and employee expense growth in
excess of inflation as a result of salary increases of 11,2% following the agreement with the unions.

“The inventory write-offs are as a result of technologically obsolete and slow moving inventory and are unlikely to continue into the future,” September said.

The effect of competition and the weaker economic environment were evident in Telkom’s results.

“The negative effect of growing competition and fixed-to-mobile substitution is highlighted in the 9,3% decrease in Telkom South Africa’s traffic revenue. This continuing trend justifies the imperative for the group to enter the mobile market and particularly the mobile data market.”

The company would compete “aggressively” in the SA and African markets.

“Our data centre operations, branded Cybernest, was launched on November 19 2009. This initiative is further evidence of our drive to diversify and grow our revenue streams and take costs out of our current operations.”

September was confident the strength of the fixed-line network and Telkom’s employees would allow it to offer its markets cost effective and competitive services.

Telkom would pay a special dividend of R1,75 a share. - Sapa