SA Telkom's full-year earnings improve on slightly higher revenue, cost cuts [IntelliNews - Weekly Reports]
(IntelliNews - Weekly Reports Via Acquire Media NewsEdge) South African telecoms operator Telkom posted a profit after tax of ZAR 4bn (USD 372.8mn) for the fiscal year to end-March 2014, up from ZAR 1.5bn a year earlier. Excluding one-off items not related to the company's core activities, the profit grew 5.6% y/y. Headline earnings per share (the major profitability gauge in South Africa), excluding the one-off items, rose 35.1% to 388 SA cents. EBITDA grew 3.8% y/y to ZAR 8.4bn, backed by a 1.1% y/y growth in operating revenue to ZAR 32.5bn and a 2.1% reduction in operating expenses to ZAR 18.2bn.
Telkom CEO Sipho Maseko commented that the company still faces significant challenges due to a sustained pressure on fixed-line revenues. Its fixed-line voice and interconnection revenue fell 7.4% y/y to ZAR 9.4bn, and fixed-line data revenue decreased 1.1% to ZAR 10.3bn. On the other hand, mobile revenue jumped 72.7% to ZAR 2.3bn and mobile data revenue soared 80.2% to ZAR 656mn. Telkom is South Africa's largest fixed-line operator, but a relative novice on the mobile phone market. Its active mobile subscribers increased 17.6% to 1.8mn at end-March, well below industry leader Vodacom with 31.5mn clients, MTNs' 24.9mn and Cell C's 13.6mn.
Looking ahead, Maseko expects continued pressure on fixed-line voice revenues, intensified by strong competition, a challenging macro-economic environment and effects of regulatory interventions. However, the company aims to stabilise and grow revenues and further cut costs to improve EBITDA margins.
Majority state-owned Telkom has started the implementation of a massive turnaround strategy. Under it, the company has agreed to transfer the management of its mobile network infrastructure to MTN and has sold its loss-making internet service business iWayAfrica. It has also bid to buy out local information and communication technology group Business Connexion (BCX) for ZAR 2.7bn.
Telkom declared no dividend for the fiscal 2014 year, but confirmed its plans to reinstate the dividend in the 2015 financial year.
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