South African telecommunications giant Telkom has confirmed it will impair the cost of its assets by ZAR12 billion (US$1.2 billion) in a bid to turn its financial performance around.
The impairment has taken the net asset value (NAV) per share to around ZAR34 (US$3).
HumanIPO reported last week the part state-owned fixed line operator was considering such a move.
Sipho Maseko, group chief executive officer at Telkom, said: “We are committed to transforming Telkom’s financial performance.
“This will require bold and decisive action. Tough and urgent decisions will have to be made, particularly regarding costs and the decommissioning of unprofitable services. At the same time we will need to maximise potential profit opportunities.”
Maseko said the upgrade of the Telkom network will now be accelerated and said the impairment allows them to “draw a clear line between our historic position and our future”.
The impairment charge will not have an impact on the company’s cash flow, but basic earnings per share are expected to be hit with an expected drop of between 2,229 cents per share (cps) to 2,343 cps for the corresponding period for the year up to March 31, 2013.
The non-cash impairment charge is excluded from headline earnings per share, with them expected to be between 232 cps and 244 cps lower. This is the result of the cost of voluntary severance packages which cost Telkom around ZAR430 million (US$42 million) with a further provision of ZAR592 million (US$58 million) for a Competition Tribunal fine and other legal costs.
Telkom will release its financial results for the year ending March 31, 2013, on Friday.
