A R5.2 billion write-down at Telkom's Nigerian subsidiary Multi-Links depressed Telkom's normalised headline earnings a share by 11.2 percent to R4.73, reinforcing speculation about the unit's imminent disposal.
Making what was his last final results presentation yesterday, Telkom's outgoing chief executive Reuben September indicated that selling all or part of the Nigerian business was a high possibility.
Peter Nelson, the chief financial officer, admitted "it was the worst technology business to have bought into. We are open to a lot of options, but we have to fix the business on the ground." The unit, which Telkom bought in 2007 for R410 million, made up to R2.1bn in losses for the comparative period last year.
But Spiwe Chireka, an analyst at Frost & Sullivan, said Telkom would be making a mistake by disposing of the Multi-Links business now.
"It's not a case that Nigeria does not have opportunities for them. It's a case of what they will do about the opportunities," she said.
Chireka said penetration rates in Nigeria's mobile, fixed-line and data environment were still low, in spite of Nigeria being a hotly contested market for telecommunications.
Multi-Links posted earnings before interest, depreciation, taxation and amortisation (Ebitda) losses of R659m for the year, compared with a loss of Râm a year earlier.
Inventory write-offs for Telkom and employee expense growth in excess of inflation also impacted heavily on the results. A negative effect of intensifying competition and fixed-to-mobile substitution also accounted for a 9.3 percent decrease in Telkom's revenue.
Telkom's overall Ebitda margin declined from 31.5 percent to 26.5 percent. Operating revenue increased 7 percent to R33.9bn. However, group operating expenditure grew by 98.4 percent to R32.7bn.
A healthier balance sheet revealed capital expenditure was reduced by 44.2 percent to R5.4bn.
Net debt was reduced by R10.8bn decreasing normalised net debt to earnings before Ebitda from 1.3 to 0.5 times.