Telkom profit tumbles

Telkom's first-half profit fell 62% as a result of falling revenue from voice calls and costs related to job cuts.

Profit was R1.11-billion compared with R2.89-billion a year earlier, the company said yesterday. Revenue remained almost unchanged at R16.2-billion.

"The operating environment has been challenging for the past six months," CEO Sipho Maseko said. "The telecoms industry remains very competitive and, as a result, margins are under strain, particularly in the enterprise segment."

Telkom is reducing costs to offset a decline in landline use and increased operating expenses. The partly state-owned company is working with unions to cut jobs. It has 19000 employees.

It plans to reinstate a dividend in the 2015 fiscal year, when revenues are expected to stabilise and grow . Costs related to job cutting were R325-million in the six-month period after 406 employees were retrenched or took early retirement.

The company's shares fell 1.64% to R62.95 yesterday. The stock is up nearly 140% in the past year and is the best performer on the FTSE-JSE Africa All-share Index.

Fixed-line internet subscribers increased 7% and the mobile device subscriber base rose 27% to 2million. Telkom is the fourth-biggest cellphone operator, trailing Vodacom, MTN and Cell C.

"Our customers are feeling the effects of the adverse economic environment and are adjusting their usage and purchasing patterns," Maseko said.

"We are still committed to our financial guidance but remain cautious of the negative economic headwinds."

Vodacom, Telkom's biggest competitor in the cellular networking business, reduced earnings forecasts last week as a weaker economy curbed growth.