Icasa rate cuts lead to R745m Vox impairment

Mergers, Acquisitions and Financial Results

Vox Telecom is writing down goodwill and intangible assets to the tune of more than R745m. The news comes just hours after the Independent Communications Authority of SA announced it would slash call termination rates starting next year.

AltX-listed Vox, which is led by CEO Tony van Marken and MD Doug Reed, is particularly exposed to the reduction in mobile termination rates — the fees the cellphone operators charge each other to carry calls on their networks. Its Vox Orion subsidiary is the country’s biggest least-cost routing (LCR) provider.

Vox Orion is actively moving its LCR customers onto its own telecommunications network, but it’s not clear yet how much success it’s had in that regard – more details should be available when Vox publishes its annual results next month.

Most of the write-down is related to Vox’s acquisition of Vox Orion (originally Orion Telecom). But the company has also decided to revalue “certain consumer Internet service provider intangible assets based on expected future cash flows to be received through its subsidiary @tlantic”.

Because of the write-down, Vox will report a basic loss per share for the year ended 31 August of at least 61c/share (from earnings of 5.49c/share previously). Headline earnings per share should be between 6.18c and 6.8c. That’s broadly in line with last year’s results, suggesting the underlying Vox business is still strong. Despite this, investors took fright at the write-down, sending the share price down 11.9% by mid-afternoon.