Telkom tanks on R1.5bn bill for restructuring
JOHANNESBURG - The shares of partly state-owned Telkom tumbled 16.93percent on
the JSE to close at R19.43 a share on Friday after it said that the first phase of its restructuring would cost R1.5billion.
Telkom said the restructuring - in which some employees had opted for voluntary severance packages and voluntary early retirement packages as an alternative to retrenchment - would hit its earnings in the 2020 financial year.
“The cash outflow related to the restructuring process is expected in the first half of the new financial year.
"Available cash resources will be used to fund the restructuring process. This allows Telkom to remain within the current debt levels,” said Telkom.
In January, Telkom, which is 40percent state-owned, announced that it intended to axe 3000 employees as it grappled with high debt and a decline in the fixed-voice market in a tight economy.
Telkom has bled more than 80percent of its value to R19.43 a share on Friday from about R100 last June amid an aggressive sell-off by investors. Telkom is also battling debt of R11.7billion.
South African Communications Union (Sacu) organiser Keith Aimes said on Friday that 2100 employees had agreed to accept voluntary severance packages.
Aimes said organised labour had objected to the packages because employees were agreeing to them for the wrong reasons.
“The company coerces people to take packages out of fear. They say if you do not take a package and are forcefully retrenched, you will get less money,” said Aimes.
The Labour Court earlier this month gave Telkom the go-ahead to continue its retrenchment process after dismissing an application launched by Sacu and the Communication Workers Union (CWU).
Sacu and CWU applied for an urgent interdict to pause the process, charging that the offers were made to employees without having properly consulted the unions first.
However, Judge Robert Lagrange said it was the unions, not Telkom, that were responsible for erecting the “stumbling block to consultations proceeding”.
Aimes said the unions walked out of the process, because of dissatisfaction with the packages and had since returned to the process.
The company needed to invest in its fibre business, Aimes said.
“We believe that the company should invest in fibre and upgrade the network,” he said.
Telkom has said the restructuring was due to the shift to fibre, LTE/LTE- as new sources of revenue, coupled with the rapid decline in its high-margin fixed-voice business, which had hurt the group.
It said its fixed-voice revenue in the second half of the financial year had plummeted relative to the first half, despite reducing the legacy fixed-voice revenue contribution to group revenue to 22percent in 2019 from 56percent in 2013.
“The mobile business sustained its growth trajectory into the second half of the year from a higher base and continued to drive the overall group revenue growth thus, offsetting the negative impact of fixed-voice revenue.
“However, the growth in the new revenue streams has not been sufficient to offset the negative impact on group earnings before interest depreciation and amortisation (Ebitda).
"Therefore, group Ebitda continues to be under pressure,” Telkom said.