Telkom profit down 35%

South African fixed-line operator Telkom reported a 35% drop in full-year profit on Monday, hit by expenses from from its new mobile venture and job cuts, and warned it needed to get tougher on costs.

Africa’s biggest fixed-line operator said normalised headline EPS for the year to end-March totalled 444.9 cents, compared with a restated 686.7 cents a year earlier.

Headline EPS, the main measure of profit in South Africa, excludes certain one-time items.

The results outstripped an average estimate of 408 cents in a poll of 13 analysts by Thomson Reuters.

Operating revenue fell 5.2% to R33.4-billion rand, while EBITDA—or earnings before interest, tax, depreciation and amortisation—dropped by 11%.

Telkom said last month it expected to post a 25% to 45% decline in earnings, citing the costs of its new mobile business, 8ta, and severance packages.

It also said at the time it was restating the previous year’s results to reclassify its Nigerian unit as an asset for sale.

Hit by the decline in traditional telephony and stiff competition from mobile heavyweights MTN Group and Vodacom, Telkom has been struggling to rein in costs and turn itself around.

The company said in April it would sell part of its money-losing Nigerian unit, Multi-Links, for $52-million.

That process has been delayed by a legal dispute with private equity firm Helios Investment Partners over leases related to telecom towers. A unit of Helios is suing Telkom for around $250-million.

Telkom is hoping its new mobile business will provide a much-needed revenue boost, although analysts have said it will likely face a tough battle in the competitive industry.

The company said in February it would offer severance packages to help cut costs. At least 1 650 employees had already taken such packages, a spokesperson for trade union Solidarity told Reuters last month.

Shares of Telkom, which is nearly 40% owned by the South African government, are down about 2.5% so far this year, compared with a 3% decline in Johannesburg’s all-share index.—Reuters

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