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Send  Print  Share  RSS  Twitter  22 Nov 2010

JSE Results: Telkom

Johannesburg, Nov 22 (I-Net Bridge) - Telecommunications group Telkom (TKG) on Monday reported normalised headline earnings per share from continuing operations decreased by 5.3% to 265.7 cents for the six months ended September 2010.

Normalised basic earnings per share from continuing operations decreased 6.8% to 260.2 cents per share.

Group revenue declined 5.4% to 17.604 billion rand, witt profit from continuing operations down 9.3% to 1.4 billion rand.

Telkom said it results "paint a picture of an organisation under pressure".

"It is essential to stabilise the business, which we are doing through exiting the CDMA business in Nigeria and focusing iWayAfrica mainly on corporate customers. This allows us to allocate capital to those areas that will drive revenue growth and promote cost efficiencies," the group said.

It added that the introduction of its mobile service, 8ta, provided Telkom with an essential tool for retaining and growing the group's customer base.

"It is expected to assist in both revenue growth and cost efficiencies. We are excited by the response this emotive brand has generated and look forward to it complementing our suite of competitive products and services," Telkom said.

Telkom company employees declined from 23,445 to 23,013 during the period. Employee expenses increased 10% to 4.853 billion as a result of a 7.5% annual salary increase and 144 million workforce reduction expenses, the group said.

Voice revenue decreased 19.1% to 6.9 billion rand as a result of lower minutes of use and lower tariffs. Telkom elected to pass 100% of the benefit of the drop in mobile termination rates from 125 cents per minute to 89 cents per minute to its customers.

Local voice revenue declined 10.8% to 1.5 billion rand, long distance voice revenue was down by 12.4% to 809 million rand, fixed-to-mobile revenue was down 24% to 2.5 billion rand and international outgoing revenue declined 19.9% to 378 million rand.

"Our continued drive to convert customers to annuity revenue streams saw revenue from subscription based calling plans grow 10.2% to 807 million rand. Voice annuity revenue, which includes line rental, calling plans, customer premise equipment rental and value added services grew 1.5% to 3.9 billion rand. Telkom Closer subscribers grew 16.1% to 738,396 and Supreme Call subscribers grew 54.2% to 23,674," it said.

Data revenue increased 14.9% to 5.6 billion rand, the group said. Data connectivity services revenue increased 9.3% to 2.707 billion rand which includes the 23.4% increase in ADSL revenue to 790 million rand. Leased line revenue increased 13.5% to 1.116 billion rand, the group said.

"Mobile leased line revenue continues to grow healthily, despite self-provisioning, reflecting the growing demand for bandwidth. Internet access and related services revenue increased 13.5% to 986 million rand and managed data network services revenue increased 37.3% to 641 million rand. Managed network sites grew 10.7% to 33,023," Telkom said.

It noted that ADSL subscribers increased 16% to 699,368. "Broadband remains a growth area for Telkom and more capital is being allocated to this revenue stream. 10 Mbps services and new PC broadband bundles have been launched. Telkom Simple, a campaign offering fast internet, free landline calls and free installation for 369 rand per month will run from 12 September 2010 to 15 December 2010."

Interconnection revenue decreased 37.4% to 912 million rand reflecting a 41.1% decrease in mobile domestic interconnection revenue to 356 million rand. Telkom said the decline in mobile interconnection revenue is as a result of continuing mobile substitution and the sharp decline in international mobile outgoing revenue is as a result of lower volumes, especially on switched hubbing, due to operators using alternate international gateway providers.

"International interconnection revenue declined 54.4% to 346 million rand as we are more selective with our switched hubbing revenue, which is impacted by exchange rates and decreased 76.2% to 116 million rand," it said.

Operating revenue from the Telkom South Africa segment decreased by 5.6% to 15.905 billion rand, "primarily due to lower fixed-to-mobile traffic revenue and lower international and mobile interconnection revenue, partially offset by growth in data revenues," it said.

Operating revenue for its Multi-Links operation decreased 9% to 744 million rand and operating expenses decreased 15.4% to 1.008 billion rand. The loss from operating activities improved by 29.4% to a loss of 262 million rand, Telkom said.

Group capital expenditure, which includes spend on intangible assets, decreased by 21.6% to 2.165 billion rand and represents 12.3% of Group revenue.

Jeffrey Hedberg, acting group CEO said: "The six months under review have been challenging but exciting. The crowning achievements are Telkom's flawless delivery of the Soccer World Cup 2010 and the build up to the launch of 8ta, our new mobile service. The South African telecommunications industry is becoming more competitive and the regulatory environment continues to pose challenges to all operators.

"It is imperative that Telkom changes the way it operates in order to defend its revenue and grow into new revenue streams. This is an enormous task given the complexity of Telkom's systems, networks and human resources. In addition, Telkom has had to deal with significant management changes. These dynamics create an excellent opportunity for new management to stabilise the business and then execute on its plan to improve the financial performance of the Telkom Group," he said.

Looking ahead, Hedberg said Telkom intends to focus on EBITDA and cash flow and drive revenue through its exclusive differentiators. He said that the launch of 8ta would see the provision of innovative packages that allow people to talk more.

The group also aims to drive broadband, "through convergence and bundling," Hedberg said.


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