TELKOM PROFIT PLUNGES
REUBEN September's final presentation of annual results as Telkom chief executive was a far cry from previous events where he was known to tell jokes while outlining strategy.
Telkom's full-year results briefing for 2010 was presided over by financial director Peter Nelson while September avoided his usual post-presentation media interviews.
September, who will leave the group in November after serving three years as chief executive, described the 2010 financial year as "tough with muted revenue growth" citing the effect of competition and a weaker economic environment for the group's poor performance.
While the sale of Telkom's 15percent stake in Vodacom to UK-based Vodafone and the subsequent listing of the remaining 35percent on the JSE accounted for R40,5billion in profit, the group was left with free cash flow of R5,5billion.
In addition to continuously declining fixed line customers in SA, the group was forced to write off R5,1billion in assets and goodwill from its mobile business in Nigeria, Multi-Links, which failed to perform as expected.
Telkom SA's voice and data traffic revenue slipped by 9,3percent over the reporting period. This was attributed to growing competition and increased fixed-to-mobile substitution. The fixed-line penetration rate in the country also dropped from 9,1percent to 8,7percent.
September said the restructuring of Telkom into three business units and the start-up of Telkom Mobile had also increased expenditure.
Operational revenue growth was marginal at 0,7percent to R37billion.
Group operating expenses, however, grew by 8,4percent. Proceeds from last year's Vodacom sale helped increase net profit by 657percent to R41,8billion.
However, normalised headline earnings per share from core business dropped by 11,2percent to 473 cents per share.
Frost & Sullivan ICT analyst Spiwe Chireka said Telkom's mobile venture, to be launched later this year, could be the key to expanding the group's revenue and customer base.
Telkom's mobile service, which is expected to kick off later this year, will be leveraged off the company's existing nationwide network as well as a roaming agreement recently signed with MTN.
While Telkom recently filed for a meagre 0,8percent increase in overall tariffs, existing customers are still unhappy.