South African fixed line operator Telkom is seriously considering reducing the value of its legacy network in response to shares consistently trading below their net asset value (NAV).
The part state owned company, which will publish its end of year results at the end of next week, said the move was in line with other fixed line businesses globally who face strong competition from mobile operators as technology continues to advance at a fast rate.
HumanIPO reported in April Telkom had warned its shareholders to expect a year on year fall of at least 20 per cent in headline earnings per share (HEPS) for the year ending March 31, 2013.
Sipho Maseko, group chief executive officer (CEO) at Telkom, said: “A decision to impair will draw a clear line between the historic position of Telkom and our future as network provider of high speed, quality broadband.
“In effect, such a decision will allow us to ‘reset our base’ and be competitive. It will also send a clear message to our stakeholders that we are prepared to take bold action to ensure that Telkom is positioned to succeed.
“It is important for us to focus on sustainable earnings going forward and the market segments where Telkom has a competitive advantage.”
Telkom added a non-cash impairment charge which could follow the review by the board will not impact on the “significant cash flow” it generates from its operations.
It said it will have no impact on its strong cash position, low debt and ability to fund capital programme from its own resources, while it will continue to invest capital in upgrading its fixed and mobile network.
