Telkom expects higher earnings

Telkom is poised to provide fresh evidence of its turnaround on Monday 16 November, and to detail its further plans to retain and attract more customers on its network against Vodacom, MTN and other smaller players as the telco’s seeks to revolutionise broadband access in the country. By Gugu Lourie

Africa’s largest fixed-line telephone group, which this year acquired tech firm Business Connexion and is keen on snapping up Cell C, continues to produce good growth and is likely to deliver better-than-expected performance when it reports its six months to end-September 2015 on November 16.

The executives of the telco, headed by Sipho Maseko, told the market today that they expected to report a rise of 10%-30% in normalised basic earnings per share in the six months to end-September.

But take a closer look and strip out the R1.5 billion provision for voluntary severance and retirement packages affecting 3 108 employees, and a different picture emerges.

If this item was not stripped out, Telkom would have been expected to report a decline of 45%-65 in basic earnings per share in the six months to end-September.

Owing to cutting the fat in the business and selling assets, the telco benefitted from lower employee expenses due to retrenching more than 3 000 people and higher profit on sale of properties.

As part of its growth strategy, last month Telkom announced the much-awaited establishment of Openserve, which is aimed at increasing broadband access in the country through open access on its network and increase competitiveness of smaller players.

Telkom’s rebranding and spinning off its wholesale business is similar to UK’s BT, which created a standalone wholesale business known as Openreach, which comprises the infrastructure unit of BT Group.

Openserve will be rolling out its high-speed fibre-to-the-home service available on an open access basis to all licensed operators.

Furthermore, Telkom is believed to be in talks to buy Cell C, South Africa’s third mobile phone operator.

The shares of Telkom, which is valued at more than R38 billion, has risen more than 13% in the past 90 days and in the past 3 years more than 300%.



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