Telkom pulls in the big bucks

By Staff Writer for Telkom
Johannesburg, 13 Jun 2007

Telkom has made another bundle for its shareholders. It declared an ordinary annual dividend of 600c per share and a special dividend of 500c per share, both payable on 9 July, for shareholders recorded in the company's register at the close of business on 6 July.

Its fixed-line business remains the major contributor to the bottom line, contributing 63%, versus 37% from the mobile sector towards operating revenue; 68% towards operating profit and 72% towards profit attributable to equity holders after inter-segmental eliminations.

In rand-terms, fixed-line revenue increased by 1.7%, to R33.295 million, largely as a result of a 12.6% increase in data revenue and an 8.3% growth in subscriptions and connections.

Highlights of the group's key performance areas include:

* Group operating revenue increased by 8.4%, to R51.619 million.

* Operating profit decreased marginally by 1.4%, to R14.470 million.

* The group EBITDA (earnings before interest, tax, depreciation and amortisation) margin decreased to 38.3%, as at 31 March 2007 (compared to 43.2%, at 31 March 2006) mainly due to higher fixed-line operating expenditure. The fixed-line business delivered an EBITDA margin of 38%, including the effect of raising the Telcordia provision of R527 million. The margin of 38% is within management's guidance of 37% to 40%.

* 45% net debt increase to R9.901 million, and net debt to equity ratio of 30.9%.

* Headline earnings per share decreased by 1%, to 1 710.7c per share, and basic earnings per share decreased by 3.7%, to 1 681c per share. The reduced earnings are attributable to a decrease in operating profit due to an increase in operating expenses. These factors were partially offset by an 8.4% increase in operating revenue and an 8% reduction in finance charges.

Cash generated from operations increased by 4%, to R20.520 billion. This facilitated capital expenditure of R10.037 billion and the repurchase of 12.1 million Telkom shares to the value of R1.6 billion. The net debt to equity ratio of 30.9% at 31 March 2007 remains below the announced targeted range of between 50% and 70%, but is an improvement from the gearing of 23.2% at 31 March the year before.

Vodacom's performance

Acting CEO Reuben September added that Vodacom again delivered an "exceptional performance", increasing its subscriber base by 28.2%, to 30.2 million customers.

He also alluded to the increasingly competitive telecoms landscape, but emphasised that Telkom was prepared for the challenges that lay ahead.

"Telkom now enters a challenging period with Neotel as its fixed-line competitor, coupled with significant pressure on its product and services pricing."