Telkom shares plummeted to a seven-year low on the JSE yesterday after the utility warned of a sharp decline in profit for the six months to September caused by steep losses in its cellphone business and African subsidiaries.
The fixed-line legacy carrier and parent of South Africa’s fourth cellular operator, 8.ta, said basic earnings a share were expected to be as much as 70 percent lower than in its first half last year.
The decline was mainly attributed to the R900 million losses incurred by 8.ta. Analysts said yesterday that this was expected as 8.ta was still considered a start-up and was expected to incur losses for at least another two years. In the period, 8.ta grew its subscriber base by 86.3 percent to 882 235 revenue-generating customers, with a blended average revenue a user of R61.97 a month.
Telkom said its financial performance was also dragged down by an impairment of approximately R450m for iWayAfrica, its pan-African corporate data provider business.
The stock fell 5.1 percent to R31.50, its lowest since January 2004, according to Bloomberg.
Andrew Kingston, an equity analyst at Sanlam Investment Management, said while losses at iWayAfrica were disappointing, the subsidiary was not a big part of Telkom’s business.
iWayAfrica’s performance was affected by higher customer churn and the weakening of exchange rates.
If the impairment of iWayAfrica was excluded, basic earnings would have been at least 40 percent lower than a year earlier.
The interim results will be the first results produced under new chief executive Nombulelo “Pinky” Moholi.
Telkom said it would sell Multi-Links, its loss-making Nigerian subsidiary, to Hip Oils Topco, an affiliate of Helios Towers Nigeria.
The sale, if concluded as planned by today, would result in a net loss of approximately R650m, Telkom said. The net loss was mainly due to the cumulative amount of exchange differences previously recognised in equity and now recognised in profit and loss on the disposal of Multi-Links.
Finalisation of the transaction is subject to the consent of the Security and Exchange Commission of Nigeria and the absence of injunction, restraining order or decree of any Nigerian governmental entity prohibiting the transaction.
The transaction will not be included in basic and headline earnings because it will be concluded after month end.
The operating loss of about R200m suffered by Multi-Links for the period would be disclosed as earnings from discontinued operations, Telkom said.
Telkom said it would issue an updated trading statement once there was “reasonable certainty within a 20 percent range of the results when compared to the previous comparable period”.
Telkom’s results will be published on November 22. - Business Report