Telkom warns of massive drop in profits

Telkom has issued a trading statement warning investors that it anticipates a significant drop in profits in its half-year financial results for the period between 1 April and 30 September 2022.

The mobile operator said it expects its headline earnings per share (HEPS) and reported basic earnings per share (BEPS) to drop by between 45% and 55%.

It reported HEPS and BEPS of 276.8 and 285.5 cents per share (cps) in September 2021.

This year it expects its HEPS to drop to between 124.6 and 152.2 cps, and its BEPS to decline to between 128.5 to 157.0 cps.

Telkom released the trading statement on Monday, 14 November, saying the expected profit drops are primarily due to the changing proportion of prepaid and contract subscribers on its mobile network.

“This was mainly due to Telkom’s mobile post-paid vs prepaid mix changing, which had the impact of deferring revenue over 24 – 36 months, as well as the cost base increasing,” its trading statement reads.

The mobile operator also listed several other factors contributing to its profit decline, including:

  • The effects of revenue deferral from continued post-paid mobile sales growth reduced revenue by R299 million
  • A change in its mobile product mix, combined with upfront handset costs
  • Increased cost of handsets, equipment, software, and directories by over 30% from R2.453 million in the previous period
  • Increasing service and maintenance costs. Maintenance costs increased by more than 10% from R1,924 million, and service fees rose over 20% from 1,611 million
  • Higher backup energy costs due to load-shedding

However, Telkom noted that savings in other areas, net finance charges, fair value movements, and reduced taxation helped offset some of these higher costs.

The mobile operator noted that despite declining earnings and profit, it expects to sustain its topline revenue compared to the prior period.

 


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Telkom warns of massive drop in profits