Telkom South Africa Earnings Down

Mergers, Acquisitions and Financial Results

Headline earnings per share for Telkom fell by 35.2 percent to 444.9 cents while normalized operating revenue is down 5.2 percent for the year ended March 2011.

"Competition, pricing pressures and regulatory intervention have all had an impact on our revenue. The declines seen in our traditional fixed-line voice revenue are set to continue. The year under review has been tough, with revenue declining 5.2 percent to R33.4 billion," said Group Chief Executive Officer Nombulelo Moholi. She was speaking at the release of the group's annual results on Monday.

The results showed that voice revenue decreased 16.8 percent to R13.7 billion due to lower minutes of use and lower tariffs, while normalised earnings before interest, taxes, depreciation and amortisation (EBITDA) margin decreased to 27.4 percent from 29.3 percent.

Operating expenditure decreased 1.5 percent to R29.7 billion, despite the 10.3 percent growth in employee expenditure to R 9.7 billion. This was largely as a result of the reduction in payment to other operators while employee expenses increased as a result of R739 million voluntary employee severance package expenses incurred and the 8.3 percent average annual salary increase.

In March, Telkom launched voluntary severance packages for management employees, with 1 830 employees taking advantage of it.

"Telkom is firmly committed to reducing its cost base. This must be done in a manner that ensures sustainable, long term benefits," said Moholi.

ADSL subscribers increased 16.1 percent to 751,625 while data revenue grew by 7.7 percent to R10.7 assisted by years of investment in Telkom's network. "This is a good achievement, given the muted economic conditions and intensifying competition," said the CEO.

Moholi said Telkom has done extensive review of its network to ensure that any capital allocation is based on customer requirements, commercial returns as well as the ability to differentiate.

"The restraint in our capital expenditure is visible in the 27.2 percent decline in Telkom SA's capital expenditure (excluding mobile) to R2.8 billion. Going into the future, capital expenditure spending will be aimed at growing our ability to service enterprise customers and other value clusters and providing far superior broadband speeds."

"We have to capitalise on Telkom's strengths, including the network and relationships with business, to provide higher speeds and end to end reliability that cannot be matched by our competitors," said Moholi.

In the future, Telkom is to focus on its leadership and organisation; EBITDA and cash flow; broadband as well as its mobile service line 8.ta launched last October.

The mobile service has 1,19,596 subscribers, who were all RICA compliant. "We were extremely pleased to have launched 8.ta during the past financial year. It is an exciting venture for Telkom. We look forward to launching mobile services into the enterprise market during the coming year," said Moholi.