Telkom’s share price plummets after gloomy forecast

Telkom’s share price had its biggest drop in two years on Monday morning, as its latest update triggered a selloff.

The company, valued at R16.76bn on the JSE, said it expects headline earnings per share (Heps), a measure of profit that strips out impairments and once-off items, to plunge 45%55% to 128.5c-157c in the six months to end-September.

The share price had fallen 8.41% to R32.88 by 10.13am, the biggest drop since the 8.39% decline on July 21 2020.

The latest trading update makes for sombre reading months after a tug-of-war between MTN and Rain over Telkom, but MTN has since withdrawn its offer, leaving Rain as the only potential suitor.

Telkom said on Monday the drop in Heps was because of a change in its mobile postpaid versus prepaid mix, which had the effect of deferring its revenue over two to three years, and its cost base rising.

“The impact of revenue deferral resulting from the continued growth of our postpaid mobile sales reduced revenue recognised by R299m,” it said.

“The upfront spend on handsets recorded immediately increased the cost of handsets, equipment, software and directories by more than 30% from R2.453bn in the prior period,” it added in the brief statement.

Maintenance costs are up one-tenth and service fees onefifth, partly offset by savings in other areas because of the management of payments to other operators, employee costs, marketing, and other expenses.

“Notwithstanding the weaker performance in earnings and challenging trading environment, Telkom expects to sustain its top-line revenue compared to the prior period,” the company announcement said.