Vox writes down LCR unit

Vox Telecom expects to make an earnings per share loss, after writing down its least cost routing and Internet service provider units by R745 million.

The company said in a statement on Friday afternoon that it expects a minimum loss per share of 60.94c for the year to August. A year ago, the company reported a gain of 5.49c a share.

Vox says the loss is because of goodwill and intangible asset write downs of at least R745 million. This write down is mostly at its least cost routing (LCR) business, Orion, because of interconnect cuts. However, it has also made write downs at @lantic Internet, which is unrelated to interconnect.

Since Vox's last financial year, the Independent Communications Authority of SA (ICASA) has issued final wholesale termination rates, the company says. Vox has been migrating its LCR business to a new platform, but expected to see short-term pressure at the subsidiary.

The regulator on Friday issued final regulations for interconnect rates, dropping mobile termination rates to 73c at peak and 65c during off-peak times from March next year. The following year, rates will drop to 56c and 52c. However, by March 2013, wholesale mobile terminations rates will drop to 40c, regardless of the time the call is made.

Vox says it had made certain assumptions about future reductions in interconnection rates based on previous statements by ICASA. As a result of these changes, it revalued the least cost routing business based on certain assumptions.

In addition, Vox has also revalued some intangible assets based on expected future cash flows from @lantic Internet, which does not relate to changes in interconnect rates. As a result, it has written down goodwill and intangible assets by R745 million.

Headline earnings are not affected and are expected to be between 6.18c and 6.8c per share compared with 6.18c last year.

Vox says it will make a further announcement when it is able to “quantify the expected basic loss per share with a greater degree of certainty”. Its results are expected to be published on 24 November.