Telkom share price crashes to fresh lows

The sharp sell-off in Telkom shares continued on Monday in the wake of poor financial results and cabinet’s decision to block a potential deal with Korea’s KT Corp. By Craig Wilson.

Added by Craig Wilson on 11 June 2012.
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Telkom’s share price fell by almost 6% on Monday to R19,11 to close at its low of the day and at a fresh eight-year low as investors continued taking fright over the operator’s poor financial performance and government’s controversial decision not to support a deal with Korea’s KT Corp against the management team’s advice.

The company’s share price is now down by nearly 17% in a month, by 21,5% over three months and a staggering 45,3% over the past year.

Its market capitalisation has sunk to below R10bn, meaning it’s now worth less than 7% of Vodacom, in which it held a 50% stake until 2009. Analysts are concerned that the company is pouring billions of rand into 8ta, its mobile start-up, in a cellular market that has reached more than 100% Sim card penetration.

Telkom said on Friday that it would reposition 8ta as a mobile broadband provider rather than focusing mainly on voice services and that it would build a fourth-generation mobile network based on long-term evolution technology. It was working on plans for this network with KT Corp before government said it would not vote in favour of the plan to sell 20% of the company’s equity to the Koreans under the terms proposed by the two companies.

Announcing its annual results last week, group CEO Nombulelo Moholi said Telkom would suspend dividend payments to stakeholders — government is the biggest loser of this decision since it holds 39,8% of Telkom’s equity — because of the poor financial performance and the need to reinvest cash in its network.

Telkom wants to rejuvenate its network by replacing ageing infrastructure and provide higher-speed fixed-line broadband access to its ADSL subscribers. It’s spending an estimated R13bn over the next five years on this project.  — (c) 2012 NewsCentral Media

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  • TTRH

    No surprises here.

  • http://www.facebook.com/bakhonam Bakhona Conez Madikane

     Does any one have any stats on the annual user base growth on mobile 3G? Depending on this number, it may be a worthwhile investment from Telkom to put their cash reserves into 8ta. This 100% sim penetration is a flexible market, besides, it’s one of their last crutches to pull them through this molasses of trouble they find themselves in. At this point in time it makes the best sense to pour back into ageing infrastructure and 8ta, due to a lack of options really.

    It also makes sense that they suspend dividends, my only concern is year on year growth, revenue decline, customer retention and the ongoing financial performance woes will not be able to sustain a realistic plan for Telkom. 

    Bakhona

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