Telkom SA, Africa's largest fixed-line operator, gave its chief financial officer Jacques Schindehutte a R6-million, interest-free loan to buy shares in the company while he was being probed for misconduct.
"The loan was given to him at the end of September," chief executive Sipho Maseko said on Monday. "If we had denied Jacques the loan on September 30 based on an investigation that was not concluded, we would have unfairly prejudiced him."
Schindehutte was suspended on October 24 following allegations of "gross misconduct", Maseko said, declining to give further detail. The probe into the executive, who is still a Telkom employee, began in August, according to spokesperson Pynee Chetty.
Telkom, which is 40% owned by government, may have breached compliance regulations relating to the Companies Act after it gave Schindehutte the interest-free loan, he said.
The company said first-half profit excluding one-time gains rose 41% to R773-million after the South African currency weakened and payments to wireless operators fell. The shares gained as much as 1.4% and traded 0.7% higher at R26.89 as of 10.35am in Johannesburg, giving the company a market value of R14-billion.
Profit including one-time items such as a gain from medical aid liability was R2.95-billion in the six months through September, the company said. Revenue was little changed at R16.2-billion. Payments to other phone companies fell 18% after the cost of ending calls on other networks, known as mobile termination rates, decreased, the company said.
"The group's financial performance indicates a challenging industry environment," Maseko said. "Despite a considerable increase in the group's earnings, owing to several once-off items, underlying operational earnings remain under pressure."
Telkom is the best performing telecommunications company on the JSE in 2013, gaining 60% compared with 12% for MTN Group and 3.6% for Vodacom Group. The rand is the worst 2013 performer of 16 major currencies tracked by Bloomberg, falling 17% against the dollar.
Telkom sees "stable to slightly improving revenues", Maseko said. The company would try to lower its cost base but it would be “very very tough” for the next three years, he said. – Bloomberg