| Thu 29 Sep 2011, 7:15 | | TKG - Telkom SA Limited - Trading statement and operational update |
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TKG
TKG
TKG - Telkom SA Limited - Trading statement and operational update
Telkom SA Limited
(Registration Number 1991/005476/06)
ISIN: ZAE000044897
JSE Share Code: TKG
("Telkom")
Trading statement and operational update
In terms of paragraph 3.4(b) of the JSE Listings Requirements, companies are
required to publish a trading statement as soon as they become reasonably
certain that the financial results for the period to be reported on next will
differ by at least 20% from those of the previous corresponding period.
Basic earnings per share from continuing operations for the six months ended 30
September 2011 are expected to be at least 70% lower than the comparative period
in the prior year. The decrease is mainly attributable to the losses incurred by
the mobile business and the impairment of iWayAfrica of approximately R450
million.
iWayAfrica`s performance was impacted by higher customer churn and the weakening
of exchange rates. Excluding the impairment of iWayAfrica basic earnings are
expected to be at least 40% lower than the comparative period in the prior year.
Headline earnings per share from continuing operations for the six months ended
30 September 2011 are expected to be at least 40% lower than the comparative
period in the prior year. The decrease is mainly attributable to the losses
incurred by the mobile business. Telkom will provide an updated trading
statement once there is reasonable certainty within a 20% range of the results
when compared to the previous comparable period.
Telkom`s interim results for the six months ended 30 September 2010 will be
restated to reflect the entire investment in the Multi-Links business as an
asset held for sale. The operating loss of approximately R 200 million as at 31
August 2011, suffered by this operation will be disclosed as earnings from
discontinued operations.
Update on Multi-Links sale
Multi-Links has been sold to Hip Oils TOPCO Ltd, an affiliate of Helios Towers
Nigeria. The sale remains subject to the consent of the Security Exchange
Commission (SEC) of Nigeria and the absence of an injunction, restraining order
or decree of any Nigerian governmental entity prohibiting the transaction. The
SEC requires the submission of certain original documentation which has been
submitted and there is, currently, no indication of any order or injunction
which may prohibit the transaction.
The sale of Multi-Links will result in the recognition of a net loss of
approximately R650 million, if concluded, in the period under review, mainly due
to the cumulative amount of exchange differences previously recognised in
equity, now recognised in profit and loss on disposal of the Multi-Links foreign
operation. As it is expected that the transaction will be concluded after 30
September 2011 the impact has not been included in basic and headline earnings.
As part of the agreement of sale Telkom has guaranteed to accept liability for
certain litigation claims against Multi-Links if these claims exceed $10
million. It is considered not to be probable that the claims will exceed the $10
million.
Trading Conditions and operating performance for the five months ended 31 August
2011
The operating environment remains challenging as a result of low economic growth
and the uncertainty created by the global economic crises and volatile markets
that have characterised 2011 to date. Competition, pricing pressures and
regulatory interventions continue to have a negative impact on revenues.
Revenues are expected to be under pressure for the foreseeable future.
Group Revenue
Trading revenue has declined compared to the comparative period as a result of
continuing substitution of fixed line traffic in favour of mobile and the impact
of the fixed and mobile termination rate reductions.
Efforts to moderate the decline in revenues by introducing attractive calling
plans, data and voice bundles and fixed and mobile convergence solutions are
having some impact and these initiatives will be intensified over the medium
term.
Fixed line
Local traffic revenues have declined by approximately 14%. This is largely as a
result of a decline in volume. Long distance traffic revenue have declined by
approximately 9% as a result of lower volumes, somewhat mitigated by an increase
in calls during peak hours compared to off peak times. Fixed to mobile traffic
revenue growth has increased by approximately 2%. This is mainly as a result of
volume growth stimulated by the decline in mobile termination rates.
International traffic revenue has decreased by approximately 21% due to
competitor action and the oversupply of capacity related to additional undersea
cables. The uptake in calling plans has been muted and revenue was
approximately 2% higher compared to the comparative period.
Subscription revenue has increased as a result of higher effective pricing and
an increase in customer premises device rentals.
Interconnection revenues have declined by approximately 13% mainly as a result
of decreased volumes and a targeted reduction in low margin switched hubbing
revenue.
Data revenues have declined by approximately 6% mainly as a result of the prior
period benefiting by R334 million from the Soccer World Cup. While volumes have
increased certain price reductions have been implemented to retain revenue. Self
provisioning of lease lines by mobile operators has impacted on leased line
growth and revenue from internet access and related services have declined.
Telkom Mobile
Telkom Mobile has incurred a loss of approximately R900 million for the 5 months
ended 31 August 2011, but is progressing satisfactorily and is in line with our
expectations. The overall subscriber base has grown 86.3% to 882 235 revenue
generating customers from the start of the financial year. Post-paid customers
grew by 490% while prepaid customers grew by 56%. The growth in prepaid
customers was lower than expected because of sub-optimal distribution channels
which have now been expanded. The blended ARPU as at 31 August was R61.97, an
increase of 174% compared with 31 March 2011.
Group Operating Expenses
Operating expenses, including mobile is at the same level as the comparative
period. This excludes the impairment of the investment in iWayAfrica of
approximately R450 million.
Employee related expenses include a 3% annual increase for management and 7% for
other staff.
Release of interim results
Telkom plans to release its results for the six months ended 30 September 2011
on or about Monday, 22 November 2011.
This trading statement has neither been reviewed nor reported on by the
company`s external auditors.
Johannesburg
29 September 2011
Sponsor: UBS South Africa (Pty) Ltd
Date: 29/09/2011 07:15:01 Produced by the JSE SENS Department.
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