* H1 headline EPS down 7.4 percent
* Dividend down 9.9 pct
* Operating revenue forecast cut
* Share price hit
(Adds cut in revenue forecast, updates share price)
By Nqobile Dludla
JOHANNESBURG, Nov 10 (Reuters) - Telkom SA, South
Africa's biggest landline provider, reported a drop in half-year
profits and cut its dividend on Friday, as a result of reduced
spending by corporate and government customers, sending its
share price sharply lower.
Telkom, in which the government holds a direct stake of
nearly 40 percent, is grappling with an economy that is barely
growing amidst political uncertainty and sovereign credit rating
This has hit spending by corporate clients, said the
company, which also cut its revenue forecast for the full year.
Headline earnings per share, the primary measure of profit
in South Africa, fell 7.4 percent to 303.9 cents in the six
months ended September. The company cut the dividend payout by
9.9 percent to 118.1 cents per share.
The firm also cut its operating revenue forecast for the
full year, saying it no longer expected any growth, having
previously predicted a mid-single-digit percentage increase.
Operating revenue in the first half declined 0.6 percent to
20.1 billion rand ($1.4 billion). Operating revenue in the year
ended March 31, 2017 was 40.97 billion rand.
"Based on the current economic climate and the impact of
several price reductions in the wholesale environment, it will
be challenging to meet the mid-single-digit revenue growth by
year-end," said Chief Executive Sipho Maseko.
"Management will seek to keep operating revenue flat and
continue to exercise discipline on costs."
Shares in Telkom, which also runs a small wireless business,
were down 5.73 percent at 50.86 rand at 1428 GMT, having hit a
low of 48.56 rand earlier in the session and putting it on
course for the biggest one-day decline since June last year.
The slide in the share price, which touched its lowest level
since November 2014, could complicate the National Treasury's
plan to raise money from the sale of a portion of its $1.2
billion stake in Telkom to fund a bailout for state-owned
airline SAA Ltd.
The Treasury needs about $700 million to inject into the
national airline whose reliance on the government purse to keep
it solvent has been repeatedly cited by major credit agencies as
a threat to South Africa's sovereign credit rating status.
"There's still plenty of buyers, there will probably even be
more buyers around now but the government will get less money
for its portion of the stake," said Wayne McCurrie, a portfolio
manager at Ashburton Investments.
Telkom has been trying to reduce its dependence on fixed
voice services, where revenue fell 6.1 percent, by building its
own mobile phone business and buying an IT infrastructure firm
BCX to improve its offering to corporate clients.
"The first half of the year was characterised by a tough
economic environment and increased competition," Maseko said.
"We saw corporate businesses defer their spend on
information, communication and technology (ICT) as a result of
an uncertain political, economic and policy environment," Maseko
said, adding that lower spend from government placed a further
dampener on ICT spend in the public sector.
($1 = 14.3984 rand)
(Editing by Gopakumar Warrier, Greg Mahlich)
First Published: 2017-11-10 08:45:53
Updated 2017-11-10 16:29:23
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