South African fixed-line operator Telkom said on Monday first-half headline earnings per share fell 15,1% to 742,3 cents.
Telkom said the reduction in earnings was due to a 4,8% decrease in operating profit to R7,313-billion rand, caused by a 13,8% increase in operating expenses and a 122,4% rise in finance charges.
”An aggressive marketing initiative comprising the bundling of services at discounted rates and a reduction in tariffs, together with increased investment in materials and maintenance to improve the reliability of the network and improve customer services has led to the increase in operational expenditure,” Telkom acting chief executive officer Reuben September said in a statement.
Headline EPS, which excludes non-trading, capital and certain extraordinary items, is the key profit measure for South African firms.
”Overall, the results were a bit better than its guidance and what I was expecting,” Cadiz African Harvest portfolio manager, Rajay Ambekar said.
Last week, Telkom warned that its half-year headline earnings would be between 14% to 20% lower.
At 7.28am GMT, Telkom shares were 0,61% higher at R166, compared with a 0,2% firmer JSE blue chip top-40 index.
Ambekar said the key point of the group’s results was fixed-line revenue growth of 0,5% to R16,1-billion, saying, ”… that was positive”.
In September, Telkom said it was in talks with MTN, sub-Saharan Africa’s largest mobile operator, and Britain’s Vodafone, sparking talk it wants to sell its fixed-line business and its 50% stake in Vodacom.
Vodafone, which owns the other 50% of Vodacom, has said it is only interested in securing a majority stake in Vodacom, South Africa’s largest mobile operator.
In a conference call, September said talks were continuing. ”We [Telkom] are progressing well and looking at every opportunity … ultimately shareholders will decide and I can’t be specific on timelines,” he said.
Telkom said there could be no guarantees that its mobile strategy would change or that any change would be successful.
The firm said its fixed-line business was undergoing structural transformation as a result of increasing competition, fixed-to-mobile substitution, deregulation and rapidly changing business models within the information and communications sector.
”It is therefore imperative that the fixed-line business strives towards an integrated offering to defend and grow its revenue streams. These strategic initiatives are essential to the future strength of Telkom’s offering,” September said.
Vodacom
Telkom said Vodacom’s operating profit rose 15% to R5,7-billion.
Vodacom’s total subscriber base grew 22,6% to 31,6-million customers in the period, with South African subscribers 15,3% higher to 23,3-million.
Subscribers outside South Africa jumped 41,8% to 3,7-million.
Vodacom said average revenue per user (ARPU) fell to R119 per month from R124, ”…due to the continued dilution caused by the higher proportion of lower ARPU prepaid and contract connections made as the lower end of the market is penetrated.” – Reuters