Telkom Takes 80% Hit To Profits

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VENTURES AFRICA – Telkom revealed an 80 percent drop in profits for the first half of 2012 on Monday, as the operator struggles with the shift away from fixed-line use.

The South African fixed-line operator – which once held a monopoly on all telecoms operations – released figures for the first six months of the year on Monday, disclosing diluted headline earnings per share (EPS) of 37.2 cents ($0.042) down from 177.8 cents ($ 0.019) in H1 of last year; an 80 percent drop in profit results as compared to 2011.

Revenue remained roughly stagnant, declining very slightly to 16.5 billion rand ($2 billion), from 16.7 billion rand ($2 billion) in the corresponding period of the previous year.

The operator – which is still 40 percent government owned – has been struggling over recent months in particular, as a string of misfortunes compounds the difficulties of operating in an increasingly mobile market.

The results of the 2011 Statistics South Africa Census released earlier this month revealed that the number of households hosting a fixed-line telephone has decreased profusely over the past decade – with only 14.5 percent of households reporting ownership of a landline in the 2011 Census, down from 23.9 percent of households a decade earlier.

Meanwhile, mobile telephony has taken over the market, with 88.9 per cent of households owning a mobile telephone in the 2011 results, up from 31.9 per cent in 2001.

Under these circumstances, Telkom has been struggling to remain competitive in the market as the shift in phone tendencies has resulted in significantly less users for the operator – which had been expecting extensive hits to its revenue and profit figures.

The company earlier this year also received a $55 million fine from the South African regulator, which found the operator guilty of previous abuse of its dominant market position to the detriment of potential competitors; including intimidating practices – thus putting further pressure on Telkom’s struggling finances.

Telkom has experienced an on-going migration of top executives away from the company over the recent period, with current Chief Executive Officer Mombulelo Moholi handing her resignation to the board of Telkom on November 5th.

So far this year, Telkom share prices are down by 47 percent.