Vodacom listing hits Telkom earnings

Friday, 13 November 2009 02:00 Written by Nicola Mawson

The fixed-line operator`s earnings will be affected by once-off costs.

Listed fixed-line operator Telkom will report a headline loss per share in the half-year to September due to once-off items.

The news sent its shares down 2.37%, to R41.25, in mid-morning trade. Telkom stock opened at R42.50.

Headline earnings per share will be between 130% and 140% lower than last year, which will take it into a loss position. Once-off items affecting earnings include a goodwill impairment of R2.128 billion against Multi-Links Nigeria, and profit on the sale of Telkom Media of about R68 million.

Normalised headline earnings per share – adding back the once-off items – show a slightly better position, but are still expected to halve.

Telkom says normalised headline earnings per share should decrease by between 45% and 55%. Normalised headline earnings per share are key indicators of financial performance.

Chris Gilmour, an analyst with Absa Investments, points out that, without the Vodacom stake, the company`s bottom line earnings have been trimmed substantially. Vodacom was separately listed in May.

Last year, the company reported headline earnings per share of 1 634.8c, which was a 0.4% improvement on the previous period. Earnings per share were 1 565c, a 0.1% decline.

This year, however, including the profit from Vodacom`s sale, the company`s earnings per share will shoot up by between 1 565% and 1 575%. However, excluding the profit to reach a normalised position, earnings per share will drop by between 130% and 140%.

Telkom says its business has been affected by margin pressure in SA, as the company felt higher-than-inflation increases in operating costs.

The telecommunications company says this is due to higher payments to local and international operators, and salary increases that were reached with the union after a strike earlier this year.

Its Nigerian operations reported operating losses in line with those reported last year. Telkom says trading conditions in Nigeria remained tough as a result of local economic factors, pricing pressures and the short-term strategy to reduce inventories and acquire subscribers by subsidising certain handsets.

Its results are expected to be released on 23 November.

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