South African phone utility Telkom, which the government plans to list by March, lifted annual earnings 17% to R1,915-billion on Monday, but said it expects challenging markets through 2003.
The results for the year to March 31, 2002 are the last before the fixed and mobile phone group’s planned listing, which is expected to be the government’s biggest privatisation so far.
The figures will also form the basis of its IPO prospectus and will be scrutinised by potential investors in a licence to offer fixed-line services to rival Telkom, due later this year.
Telkom said its fixed-line business scored efficiency gains in the year, with the number of lines per employee rising to 125 from 113. This brings it closer to the 150 to 200 international benchmark for developing markets that it is targeting.
The ratio was helped by a 10% cut in fixed-line staff and a one percent drop in fixed-line subscribers to 4,9-million.
Earnings before interest, tax, depreciation and amortisation (Ebitda) rose six percent to R10,49-billion, while Telkom’s Ebitda margin was steady at 31% as revenues increased eight percent to almost R34-billion.
Group operating cash flow grew 16% to 11,3-billion.
At nine percent, operating expenses expanded faster than revenue. The higher costs were driven by rising bad debts, asset impairment losses and retrenchment costs.
Telkom has chopped more than a third of its staff numbers since a peak of 62 000 in 1998, partly through outsourcing.
Bad debts incurred by its fixed-line business shot up 44% to R965-million as cash-strapped residential customers failed to pay Telkom’s new higher tariffs.
”Going forward, we…will remain focused on maximising free cash flows and reducing debt levels. In addition, we will continue to drive greater operational and capital efficiencies,” Chief Financial Officer Anthony Lewis said in a statement.
The government-controlled utility said it would not pay a dividend to shareholders, instead focusing on cutting debt. In the year, its net interest-bearing debt was steady at R21,1-billion.
Its shareholders include SBC Communications of the United States and Telekom Malaysia — which jointly hold 30% of Telkom.
Telkom said data revenue rose 18% to R3,7-billion in the year, pushing up data’s contribution to overall revenue to 11%.
Potential investors are keeping a close eye on data income, as a second network operator, due to be licensed late this year, is expected to focus mainly on the lucrative corporate sector.
”We continue to see a strong migration of our postpaid subscriber base to our prepaid, ISDN and mobile offerings,” it said, adding the number of subscribers paying for their services upfront had risen 47% to nearly 708 000.
Clients taking the ISDN service, which allows faster Internet connections, had grown 25% to nearly 468 000.
Apart from its monopoly on fixed-line services, Telkom owns half of Africa’s biggest mobile operator Vodacom. Vodacom and small wireless data transmission firm Swiftnet account for a fifth of Telkom’s group revenue.
Telkom said it expected around R7,5-billion in capital spending for the 2003 financial year, compared to the nine billion rand it spent during the 2002 year. – Reuters