/ 9 June 2008

Telkom profit down, eyes new mobile entry

Telkom posted a 4,4% fall in its headline earnings per share, and said it aims to re-enter the cellphone market by selling its interest in Vodacom.

Telkom said on Monday its headline EPS dropped to 1 634,8 cents per share for the year to end-March as finance charges and operating expenses rose 60,3% to R1,80-million and 12,8% to R42,3-million respectively.

Telkom said the planned disposal of its 50% stake in South Africa’s leading mobile operator Vodacom would enable it to re-enter the mobile voice market.

”I think as a principle, fixed [and] wireless networks will be a benefit to Telkom because that’s where markets are moving in Africa and further afield,” Dobek Pater, a telecoms analyst at Africa Analysis, said.

”But I don’t think the expansion of Telkom into fixed wireless is going to replace Vodacom’s revenue,” he added.

Vodafone, which holds the other 50% of Vodacom, has offered to buy a further 12,5% stake in Vodacom for R18,75-billion from Telkom, while Mvelaphanda Group has said it plans to lead a bid for Telkom without its Vodacom stake.

Vodafone, the world’s largest mobile phone company by revenue, last week said its bid was conditional on Telkom unbundling or spinning off its remaining 37,5% stake in Vodacom to its existing shareholders.

Telkom chief executive officer, Reuben September, declined to comment during a conference call about the specifics of the proposals from Mvelaphanda and Vodafone.

”The situation is such that we cannot be clear on the definite timeline [of the transaction], except to say we are in robust discussions,” he said.

”These are the only discussions,” he said when asked whether Telkom was in discussions with other suitors.

September said the disposal of the Vodacom stake would enable Telkom to re-enter mobile markets, because its deal with Vodafone had barred Telkom from them.

Telkom said its R1,7-billion investment in W-CDMA technology will provide it with mobile data as well as fixed and nomadic voice capability. In the rest of Africa, Telkom owns Nigeria’s Multi-Links and Kenya’s Africa Online.

Africa units
”In the next few years in line with our strategy, Telkom will be aggressively funding the expansion of our African units and our networks in South Africa,” said September.

Telkom is also in the process of selling its investment in its pay-TV unit Telkom Media. It said it had identified a potential investor to take over a substantial portion of its stake and expected a proposal by end-June this year.

Telkom reported that its annual operating revenue rose 9% to R56,3-billion and its earnings before interest, tax, depreciation and amortisation rose 4,2% to R20,6-billion. The group said its fixed-line domestic local and long distance voice revenue fell to R6,3-billion from R7,6-billion in the previous year.

Vodacom’s total subscribers increased 12,7% to 34-million. It posted a 17,1% rise in revenue to R48,2-billion.

Vodacom’s net profit after tax rose 21,3% to R8-billion. For the first time, its data revenue contributed more than 10%, up 49,7% to R5-billion.

The mobile phone unit rewarded its shareholders with a 10% rise in declared dividends to R5,9-billion.

Shares in Telkom rose 0,95% to R149,91 by 10.06am GMT, while the Top-40 Index was down 0,32%. – Reuters