Pretoria – Increased competition, price reductions and increased operational expenses have contributed to Telkom announcing a 15.1 percent drop in headline earnings.
According to acting Chief Executive Officer (CEO) Reuben September, the companies headline earnings per share declined by 15.1 percent despite the group operating revenue increasing by 8.3 percent.

The CEO who was announcing the Telkom Group interim results for the six months ended September 2007 said this was largely due to Telkom trying to accelerate the establishment of a first class Next Generation Network (NGN) capable of delivering converged Information, Communication and Technology (ICT) services to domestic and African customers.

He stated that Telkom’s infrastructure building process was progressing well to adequately meet the demands of bandwidth hungry applications. This was particularly important as Telkom is a key partner in delivering the 2010 FIFA World Cup to the global community.

“Our ability to do so seamlessly is dependent on the investment in our network,” he said.

The company’s ADSL subscribers grew by 76.2 percent to 335 112 over the comparative reporting period and has increased by 31.1 percent since 31 March of this year.

Mr September said: “Telkom is currently on track to reach the target of 420 000 subscribers for the year ending 31 March 2008 and Telkom aims to achieve ADSL penetration of between 15 and 20 percent of fixed access lines by 2010/2011.”

In addition, internet customers, including dial-up subscribers, ADSL customers powered by Telkom Internet and internet satellite subscribers have increased by 12.4 percent to 337 853 customers as at the end of September 2007.

Despite many strides having been made in the telecommunications sector, Mr September believes a number of challenges still remain.

These challenges include problems with the Electronic Communications Act (ECA), the Independent Communications Authority of South Africa (ICASA) Amendment Act, interconnection and facilities leasing, number portability, the unbundling of the local loop, ADSL regulations the Broadband Infraco Bill.

Mr September said Telkom is focussing on diversifying its current revenue streams in that the company is realising its “traditional voice revenue is diminishing, Telkom has increased its focus on data products and value added services.

“In addition, Telkom has initiated the process to further diversify its revenue streams through the acquisition of Africa Online, Multi-Links and the creation of Telkom Media.”

In February of this year, Telkom acquired 100 percent of the share capital of Africa Online for a total cost of R150 million.

The CEO concluded by saying: “We acknowledge that Telkom faces many challenges but are also excited about the new opportunities presenting themselves through the opportunity to provide converged products and services.”

Telkom is a semi-privatised with government owning a 39 percent stake in the company, which is South Africa’s biggest fixed line service provider.

Recent competition to Telkom has been the introduction of Neotel, the second national operator.
Some of the further highlights of Telkom’s financial performance areas include the operating revenue increasing by 8.3 percent, a 4.8 percent decline in operating profit, a 50.9 percent net debt increase and net debt equity ratio of 60 percent, basic earning decreasing by 16.6 percent.

Mr September also said that cash flows from operating activities decreased by 11.5 percent.

Cash flow utilised in investing activities increased by 71.3 percent, and cash flows financing activities increased by 653.2 percent during the six months ending on 30 September 2007. - BuaNews