Shares in JSE-listed fixed-line operator Telkom are trading lower than what they were a decade ago.
Shares in the company closed at R12.28 yesterday, after gaining slightly, but have since dropped again in early morning trade. The stock is now worth less than it was in March 2003, when it was just above R14.
Telkom's current share price gives it a market capitalisation of R6.36 billion, a fraction of Vodacom's worth. Telkom used to have a 50% stake in Vodacom before the cellphone provider was unbundled a few years ago. Vodacom is currently worth R164.3 billion.
The company's share price has been hit by its results to March 2012; trading updates; the resignation of its previous CEO, Nombulelo "Pinky" Moholi; and a R449 million Competition Tribunal fine, which it recently agreed to pay, after initially deciding to appeal.
Shares in Telkom started losing more ground last June, after government binned a proposed offer from Korea-based KT Corporation that would have seen Telkom issue 20% more shares in return for a R3.3 billion injection.
Its share price has slid more than 40% since the beginning of the year and is now trading at a huge discount to its net asset value, which is worth over R30 billion more than its stock. Investors are wary as the company is losing talent, has seen top-level ructions, and is lacking clear direction from government.
Waiting game
The Department of Communications was meant to report back to Cabinet with options for a turnaround for Telkom within three months of the cancelled KT deal, but communications minister Dina Pule has yet to publicise the outcome of meetings with the company's board.
Pule has said the deal did not make sense, because Telkom's share had slid so much between when it was initiated and when the time to ink it came, that R1.9 billion was wiped off its value.
Telkom has also warned shareholders that its headline earnings per share will be at least 20% lower when it reports full-year results. It has yet to issue an updated and detailed trading statement for its expectations for the year to March.
JSE rules require that companies alert shareholders as soon as they are reasonably certain results will differ by at least 20% from the previous corresponding period.
In the year to March 2012, basic earnings per share dropped 97.8%, to 10.4c, while headline earnings per share lost 33%, to 324.7c. Total revenue from continuing operations was R33.7 billion and the company made a R179 million profit from continuing operations.
However, it made a loss from discontinued operations, which led to a R90 million loss for the year. The group also decided to suspend dividends.
Telkom has said its future performance hinges on its ability to address several key issues, including filling an execution capability gap, resolving the future of the fixed-line business, an inappropriate termination rate regime, a rigid cost structure, regulatory obligations, and government engagement.
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