Telkom's basic earnings per share from continuing operations for the six months ended 30 September are expected to be at least 70% lower than the comparative period in 2010.
The operator, in a trading statement, says this is mainly attributable to the losses incurred by the mobile business and the impairment of iWayAfrica of approximately R450 million.
Telkom previously committed to reposition iWayAfrica to focus on enterprise customers across 32 countries in Africa. It now says iWayAfrica's performance was impacted by higher customer churn and the weakening of exchange rates.
“Excluding the impairment of iWayAfrica, basic earnings are expected to be at least 40% lower than the comparative period in the prior year.”
The company's headline earnings per share from continuing operations for the six months ended 30 September are expected to be at least 40% lower than the comparative period in 2010. The decrease is mainly due to the losses incurred by the mobile business.
“Telkom will provide an updated trading statement once there is reasonable certainty within a 20% range of the results when compared to the previous comparable period.”
Multi-Links bump
The operator says its interim results for the six months ended 30 September 2010 will be restated to reflect the entire investment in the Multi-Links business as an asset held for sale.
“The operating loss of approximately R200 million, as at 31 August 2011, suffered by this operation will be disclosed as earnings from discontinued operations.”
It adds that the Multi-Links sale to Hip Oils, an affiliate of Helios Towers Nigeria, remains subject to the consent of the Security Exchange Commission of Nigeria.
The sale of Multi-Links will result in the recognition of a net loss of approximately R650 million, if concluded, in the period under review, says Telkom.
“As it is expected that the transaction will be concluded after 30 September 2011, the impact has not been included in basic and headline earnings.”
Under pressure
“The operating environment remains challenging as a result of low economic growth and the uncertainty created by the global economic crisis and volatile markets that have characterised 2011 to date,” says Telkom on operating performance for the five months ended 31 August 2011.
Competition, pricing pressures and regulatory interventions continue to have a negative impact on revenue, it adds.
Revenue is expected to be under pressure for the foreseeable future.
Revenue down
Group trading revenue has declined as a result of continuing substitution of fixed-line traffic in favour of mobile and the impact of the fixed and mobile termination rate reductions.
Telkom says efforts to moderate the decline in revenue by introducing attractive calling plans, data and voice bundles and fixed and mobile convergence solutions are having some impact and these initiatives will be intensified over the medium-term.
Local fixed-line traffic revenue has declined by approximately 14%.
International traffic revenue has decreased by about 21%, the uptake in calling plans has been muted and revenue was approximately 2% higher, subscription revenue has increased and interconnection revenue has declined by approximately 13%.
Data revenue has declined by approximately 6%, mainly as a result of the prior period benefiting by R334 million from the Soccer World Cup, says the operator.
“Growth and revenue from Internet access and related services have declined.”
Mobile expectations
Telkom Mobile has incurred a loss of approximately R900 million for the five months ended 31 August. However, the company says it is progressing satisfactorily and is in line with expectations.
The overall subscriber base has grown 86.3%, to 882 235 revenue-generating customers from the start of the financial year.
“Postpaid customers grew by 490% while prepaid customers grew by 56%. The growth in prepaid customers was lower than expected because of sub-optimal distribution channels, which have now been expanded. The blended ARPU, as at 31 August, was R61.97, an increase of 174% compared with 31 March 2011.”
Operating expenses, including mobile, is at the same level as the comparative period. This excludes the impairment of the investment in iWayAfrica of approximately R450 million.
Telkom says employee-related expenses include a 3% annual increase for management and 7% for other staff.
It plans to release its results for the six months ended 30 September around 22 November.
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