Telkom SA SOC, the South African state-controlled telecommunications company, fell as much as 30% in Johannesburg trading after the company warned it was considering writing down the value of its assets by about 13 billion rand ($679 million).
(Bloomberg) — Telkom SA SOC, the South African state-controlled telecommunications company, fell as much as 30% in Johannesburg trading after the company warned it was considering writing down the value of its assets by about 13 billion rand ($679 million).
Significant market changes and economic conditions, including low expected growth rates, have hurt the group, the company said in a statement on Wednesday. The company said it expects its reported earnings per share to drop by 465% to 485% for the fiscal year that ended in March. Headline EPS, which excludes one-off charges, is also expected to drop as much as 105%.
While South African mobile operators have been struggling with a myriad of challenges — including the deepening power crisis, vandalism, slow economic growth and high unemployment — its larger rivals Vodacom Group Ltd. and MTN Group Ltd. have been able to continue to invest in their infrastructure and maintain growth. Telkom has been in talks to sell off assets, Bloomberg News reported previously, and in February announced plans to cut as many as 15% of its workers.
Telkom shares fell 13% at 10:40 a.m. in Johannesburg after earlier dropping as much as 30%, the biggest decline since 2009.
“The group remains in structural decline with weaker cash generation, so it makes sense to impair the stale book value further,” Mergence Investment Managers head of equities Peter Takaendesa said in an interview. “Telkom continues to have some great infrastructure assets that are worth more in the hands of those that can utilize them efficiently.”
The writedown won’t impact Telkom’s earnings before interest, taxes, depreciation and amortization generated from operations, its cash position or its compliance with debt covenants, the Pretoria-based company said. Telkom has also extended its voluntary severance packages to all of its employees after consulting with unions and said the costs related to this restructuring will come through in 2024.
Telkom said it will release its full-year results on June 13.
“The announcement, and expected negative market reaction, may increase the takeover threat,” Avior analyst Michael Steere said.
(Updates with analyst’s comment in fifth paragraph.)
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