South Africa’s Telkom, Africa’s biggest telecoms company, posted a 1% decline in annual headline earnings per share on Wednesday, as operating expenses jumped.
South Africa’s fixed-line operator said headline EPS fell to 1 710,7 cents in the year to end March, below analysts’ expectations. Analysts expected Telkom to post headline EPS of 1 820,1 cents for the year to end-March, up 4,6% on the year before, according to Reuters Estimates.
By 7.19am GMT, shares in Telkom were 2,11% lower at R172,27 as investors worried over the lower-than-expected earnings.
Cadiz African Harvest portfolio manager Rajay Ambekar said the earnings were lower than expected, partly attributable to a $70-million provision for a running dispute with United States software and IT firm Telcordia which seeks $130-million in damages over a cancelled contract.
Telkom said the reduced earnings were attributable to a decrease in operating profit due to a 12,3% increase in operating expenses to R37,5-billion.
Telkom acting CEO Reuben September said it had been challenging year for the firm, with increased competition and price pressures from various quarters.
Operating revenue rose 8,4% to R51,62-billion, while operating profit slipped 1,4% to R14,47-billion. Telkom said its fixed-line business increased revenue by 1,7% to R33,295-billion.
Challenging period
Telkom said it was entering a challenging period with the entry of fixed-line competitor Neotel into the market.
”However, Telkom believes that its commitment to invest and build the next generation network will deliver the required benefits in terms of products and services at a reduced cost with increasing volumes,” Telkom said.
Telkom spent R6,599-billion during the year on its capital expenditure programme and said it expected to spend almost R7-billion in the next financial year.
September said the firm was still reviewing its mobile strategy and was not in a position to comment on talk it may sell its 50% Vodacom stake.
Some analysts are betting Telkom will sell its stake in mobile operator Vodacom, which Citigroup values up to R75-billion, to joint owner Vodafone — which would account for the lion’s share of Telkom’s current market value of R93,8-billion.
”We are in the reviewing stage of our mobile partnership strategy. It is a very intensive process and we are not in a position to announce the conclusion of the process,” September said in teleconference on Wednesday.
Telkom said Vodacom was finalising a R7,5-billion black economic empowerment deal, which is expected to be completed by the end of the 2008 financial year.
Telkom declared an ordinary annual dividend of 600 cents per share and a special dividend of 500 cents per share.
The firm said it planned to cut broadband DSL prices by an average 18,2% from August 1 — provided the country’s communications regulator approves — long-distance phone call costs by 10% and international calls by 9%. – Reuters