Telkom disaster

Telkom released a trading statement for the year ended 31 March 2023, which points to a huge decline in performance over the last year.

Telkom said it expects a 465% to 485% decline in basic earnings per share (BEPS) and an 85% to 105% decline in headline earnings per share (HEPS).

The difference between the BEPS and HEPS is due to the net impact of the impairment of assets and the profit/loss on the sale of assets.

The Telkom board is considering an impairment of assets charge for its cash-generating units – Openserve, Telkom Consumer, Gyro, and BCX – of around R13 billion. It follows Telkom’s strategy to accelerate its migration to newer technologies.

On a normalised basis, BEPS is expected to decline by 70% to 90%, and HEPS is expected to be down by 60% to 80%.

Telkom said the business suffered because of load-shedding, low economic growth, high interest rates, and evolving technological advancements.

Poor performance predicted

The disastrous trading update should not surprise investors, as many experts have warned of Telkom’s looming challenges.

The telecommunications giant still has a hangover from its monopoly days when it was the only game in town.

It is struggling to adapt to a rapidly changing and highly competitive telecommunications market, with new entrants like Vumatel and Rain eating its lunch.

Former Telkom CEO Sipho Maseko said the company was still grappling with its monopolistic past, which has hampered its ability to function in a competitive market.

One of these skills was how to sell, which Maseko described as a traumatic experience because it was not necessary before.

“I don’t think we are there yet because our systems and processes were not designed for a selling company,” said Maseko.

He said Telkom’s staff were not trained to sell on price and innovation and to ensure their products were better than their competitors.

“That is what we need to change, and I think that will take us a long time. To transition a company from a monopoly to compete on products and services – that journey still has a long way to go.”

Share price plummets

Telkom’s share price plummeted on the news, trading at just above R22 per share early Wednesday. It strengthened since then.