Telkom takes a beating

By Staff Writer for Telkom
Johannesburg, 19 Nov 2007

Fixed-line incumbent Telkom`s headline earnings per share declined by 15.1%, despite group operating revenue increasing by 8.3%.

The company also reports a 4.8% decline in group operating profit, a 37.5% decline in earnings before income tax, depreciation and amortisation, and net debt increase of 50.9%. Basic earnings also dropped 16.6%, the company says in a media statement.

"Cash flows from operating activities decreased by 11.5%, cash flow utilised in investing activities increased by 71.3% and cash flows financing activities increased by 653.2% during the six months ended 30 September 2007," Telkom says.

The drop in earnings is in line with Telkom`s trading statement released last week, when the fixed-line utility said it expected a 14% to 20% drop in headline earnings.

Telkom acting CEO Reuben September says the group`s headline earnings dipped because of increased competition in the telecommunications landscape.

He says the fixed-line segment faced significant operational challenges as a result of increased competition, fixed to mobile substitution, deregulation and rapidly changing business models within the ICT sector.

"Against this background, Telkom had to defend and grow its revenue streams," he says. Telkom also attributes loss of earnings to price reduction prices, as well as the increased operational expenses and the company`s initiative to build a next-generation network (NGN).

Convergence plans

Telkom points out that it has delivered continued revenue growth largely due to the 17.2% revenue growth delivered by the Vodacom Group. The cellular operator also delivered its six-month financial results today.

"Telkom has embarked on its mobile review strategy in order to drive the value of a converged services offering through our NGN for the benefit of all our customers, as well as our shareholders," September says.

In addition, Telkom is undergoing a structural transformation to leverage efficiencies and capability management within the fixed-line business, he says.

September notes that Telkom is positioning itself to take advantage of the future converged services environment that is fast becoming a global best practice.

"To this end, we are developing the capabilities to offer the full suite of converged services that encompass fixed, mobile, data and multimedia services."