Telkom aims to save R2-billion over two years through cost cutting measures that include merging its smaller African units, its CFO said on Tuesday.
Telkom, Africa’s biggest fixed-line operator, said on Monday when releasing its full-year results it aimed to cut costs by 10% over the next three financial years after operating expenses increased by 20% for the full-year to end March.
”[There will be cost savings of] two billion rand after two years,” Peter Nelson, Telkom’s chief financial officer, said in a conference call.
Telkom said on Monday it would delist from the New York bourse to save costs, helping to send its shares lower.
”Our cost reduction [from the delisting] will be between R30-R40-million,” Telkom chief executive Reuben September said.
Telkom shares fell 2,13% at R34,50 by 9.37am GMT, lagging a weaker JSE Top-40 index of blue chips.
”The full-year results published by Telkom on Monday were probably in line with expectations. Maybe the market was expecting a good surprise, but it didn’t come,” Abri du Plessis, chief investment officer at Gryphon Asset Management said.
”Cutting the New York listing was negative and put pressure on the share price.”
Telkom said it would keep a Level 1 American Depositary Receipt programme to facilitate over-the-counter trading in the United States, although analysts said axing the New York listing would probably limit the numbers of US-based investors.
Telkom has seen costs in its fixed-line business creeping higher due to costly maintenance expenses for its aging network. It is facing competition from mobile operators and new fixed-line firm Neotel, which is eroding revenue.
September said there would be ”no sacred cows” when it comes to cost cutting, and that staff who leave may not be replaced.
Telkom this year sold off its pay-TV unit Telkom Media. It also unbundled its 35% stake in mobile operator Vodacom and sold a further 15% stake to Britain’s Vodafone, vowing instead to beef up its data business and focus on converged communications in Africa.
Naas Fourie, Telkom’s chief of strategy, said the company aimed to merge its smaller businesses, such as ISPs Africa Online and M-Web to save money.
”I think in time we will look to merge our smaller African businesses into one single business entity, so that we can get efficiencies of scale across the continent,” said Nelson. – Reuters