Telkom turnaround on track claims leadership

Telkom turnaround on track claims leadership

On the back of annual results for the year ended 31 March 2015, leadership at South African telecommunications services provider Telkom believes the company's turnaround strategy is still on track.

Net revenue increased 3.1% to R26 billion, while operating expenses (excluding depreciation) was down 1.2% to R17.7 billion.

Headline earnings per share from continuing operations, excluding once-off items, increased 60% to 532.5 cents from the previous year, while basic earnings per share increased by 135.7% to 542,3 cents from 230.1 cents.

Telkom recorded a normalised profit after tax of R2.8 billion for the year, excluding severance package costs and the tax benefit of the settlement of the post-retirement medical aid liability for certain pensioners.

"This is a 135.7% increase compared to the previous year. Group EBITDA also improved 15.1% to R9 billion (2014: R7.8 billion)," read the company's results statement.

"We set out to achieve further stability in the business and largely attained it under challenging conditions. We are nearing the completion of the stability phase of our turnaround, which included a de-risking of the mobile business, strengthening of our balance sheet with the settlement of the post-retirement medical aid liability for certain pensioners and addressing our fixed asset base. We have been able to maintain good cash management with free cash flow at R3.9 billion and a low gearing ratio with very low net debt to enable us to be nimble as we move ahead with plans to grow our revenues organically and inorganically," said Sipho Maseko, Group Chief Executive Officer.

Telkom has achieved net revenue growth of 3.1% for the year.

The Group still faces significant challenges largely as a result of the continued pressure on voice revenue, resulting from fixed-to-mobile substitution, but the mobile business recorded a strong performance, with the EBITDA loss improving by 48.7%.

Mobile data grew 50.6% while fixed line data revenue increased by 1.5%. Changes to the mobile termination rate added R725 million to EBITDA. Fixed line revenues declined by 2.3%.

"The enterprise sector has become more competitive, affecting margins for Telkom, but Metro-Ethernet continues to gain traction and market share is stable. Managed data network services grew by 13.8% to R1 046 million. Business IT services revenue increased by 82,4% to R633 million," the company noted.

In its results statement the Group also made reference to the Business Connexion transaction saying it was pleased that the South African Competition Commission has recommended to the South African Competition Tribunal that the deal should be approved with conditions.

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