Telkom SA Ltd., South Africa’s dominant fixed-line phone company, is seriously considering the option of quiting Nigeria after its $410 million acquisition of Multi-Links failed to yield the expected result.
Chief Executive Officer of the firm, Reubens September, said yesterday that the company was urgently looking to reduce its exposure to its troubled operations in Nigeria where it made the wrong bet on technology.
Telkom completed the $410 million acquisition of Multi-Links in January 2009, having bought an initial 75 per cent almost three years earlier.
In the latest financial year to the end of March, Telkom took an impairment charge of almost 2.15 billion rand ($283.5 million) of Multi-Links’ goodwill and ZAR3.01 billion of assets.
Telkom is now looking to “extract the maximum value” from the business and is considering opportunities to partner with another company or sell some or all the operation in Nigeria, September told reporters during a conference call yesterday.
September said he would like to resolve the matter “urgently,” and expected a decision to be made in the next six to 12 months.
“We have had individuals approach us. We are now looking at widening that process,” he said.
Multi-Links — which provides fixed, mobile, data and international communications services in Nigeria — had almost 2.26 million subscribers in the last financial year compared with 1.87 million a year earlier.
The chief executive said, Multi-Links was acquired at a time when Telkom expected code division multiple access, or CDMA, technology to continue to expand rapidly in certain countries. However, there were several new operators in Nigeria that got caught up in a price war that led to “unacceptable” margins and they were later hit by the deteriorating economic environment in the country, he said.
“If we were to take that decision today, we would certainly not go into CDMA,” September said.
Telkom ‘s operating earnings fell 15 per cent on the year, citing muted revenue growth, intensifying competition and higher operating costs.
Earnings before interest, taxes, depreciation and amortisation totaled 9.8 billion Rand while operating revenue rose 0.7 per cent to ZAR37 billion.
Earnings per share from continuing operations fell 11 per cent to 473 cents for the year ended March 2010.
The group increased its normal dividend by 8.7 per cent to 125 cents a share from 115 cents previously, while a special dividend was declared from Vodacom proceeds of 175 cents a share.
September said the year had been “tough,” with muted revenue growth as a result of low tariff increases, more competition and higher operating costs due to inventory write-offs and an 11.2% increase in salaries as a result of a new agreement with unions.
He said Telkom planned to reposition, given the tough operating environment. It will focus on growing alternative revenue streams including data centre operation, mobile telecommunications and its Africa operations to compensate for the decline in fixed-line revenue.
“We are improving our execution in current growth markets, such as broadband and wholesale, and are taking actions to defend our consumer and enterprise markets,” he said.
Chief Executive Officer of the firm, Reubens September, said yesterday that the company was urgently looking to reduce its exposure to its troubled operations in Nigeria where it made the wrong bet on technology.
Telkom completed the $410 million acquisition of Multi-Links in January 2009, having bought an initial 75 per cent almost three years earlier.
In the latest financial year to the end of March, Telkom took an impairment charge of almost 2.15 billion rand ($283.5 million) of Multi-Links’ goodwill and ZAR3.01 billion of assets.
Telkom is now looking to “extract the maximum value” from the business and is considering opportunities to partner with another company or sell some or all the operation in Nigeria, September told reporters during a conference call yesterday.
September said he would like to resolve the matter “urgently,” and expected a decision to be made in the next six to 12 months.
“We have had individuals approach us. We are now looking at widening that process,” he said.
Multi-Links — which provides fixed, mobile, data and international communications services in Nigeria — had almost 2.26 million subscribers in the last financial year compared with 1.87 million a year earlier.
The chief executive said, Multi-Links was acquired at a time when Telkom expected code division multiple access, or CDMA, technology to continue to expand rapidly in certain countries. However, there were several new operators in Nigeria that got caught up in a price war that led to “unacceptable” margins and they were later hit by the deteriorating economic environment in the country, he said.
“If we were to take that decision today, we would certainly not go into CDMA,” September said.
Telkom ‘s operating earnings fell 15 per cent on the year, citing muted revenue growth, intensifying competition and higher operating costs.
Earnings before interest, taxes, depreciation and amortisation totaled 9.8 billion Rand while operating revenue rose 0.7 per cent to ZAR37 billion.
Earnings per share from continuing operations fell 11 per cent to 473 cents for the year ended March 2010.
The group increased its normal dividend by 8.7 per cent to 125 cents a share from 115 cents previously, while a special dividend was declared from Vodacom proceeds of 175 cents a share.
September said the year had been “tough,” with muted revenue growth as a result of low tariff increases, more competition and higher operating costs due to inventory write-offs and an 11.2% increase in salaries as a result of a new agreement with unions.
He said Telkom planned to reposition, given the tough operating environment. It will focus on growing alternative revenue streams including data centre operation, mobile telecommunications and its Africa operations to compensate for the decline in fixed-line revenue.
“We are improving our execution in current growth markets, such as broadband and wholesale, and are taking actions to defend our consumer and enterprise markets,” he said.
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