Multi-Links Bad Business Hunts Telkom
- By Abimbola Tooki
- Published November 14th, 2011
- News
- Unrated
The decision to sell Multi-Links by Telkom South Africa few months ago as a result of the monumental loss in the deal continues to hunt the South African operator. The sale of the Nigerian subsidiary, which resulted in a net loss of about N10 billion, will affect the second half of its financial year.
Most of the badly run CDMA operators in Nigeria have either folded up or are currently struggling to keep their heads above waters. The stiff competition from the GSM operators has made matters worse for their lack aggressiveness and unsustainable business strategies. Of the pack, only Visafone and Starcomms are current market leaders in that segment of the Nigerian telecom market. Intercellular and Zoom mobile are believed to have been consumed by the dynamics of the market.
The company last week issued a further trading update for the first six months to end September. Telkom said headline earnings per share from continuing operations will be between 33 per cent and 38 per cent lower, while basic earnings from continuing operations will drop by between 68 per cent and 73 per cent.
A year ago, Telkom reported normalised operating revenue down 5.4 per cent, to R17.6 billion, while normalised headline earnings per share from continuing operations declined 5.3 per cent, to 265.7c, and normalised basic earnings per share from continuing operations were 6.8 per cent lower, at 260.2c. Multi-Links, Telkom’s troubled Nigerian operation, which was sold on October 3, made an operating loss of R269 million. It is reported as a discontinued operation. Telkom said the sale will result in a net loss of about R1 billion, mostly because of the “cumulative amount of exchange differences”, which was previously recognised in non-distributable reserves, but are now being realised.
In June, Telkom said it would sell the Multi-Links business to an associate of former adversary Helios Towers Nigeria for $10 million (R68 million). The previous intended sale of the CDMA unit to Visafone for $52 million (R350 million) fell through because all the conditions were not met.
The loss on the sale will be recognised in the second half of the financial year. In September, Telkom said Multi-Links’ operating loss would be around R200 million, and it would lose R650 million on the sale.
At the time of the sale announcement, chairman Lazarus Zim said it was a “win-win” deal that would benefit both sets of shareholders.
Telkom bought 75 per cent of the company in May 2007, for R1.96 billion. In January 2009, it bought out the balance of Multi-Links for a further R1.224 billion. It has written it down by more than R5 billion in total.
Telkom plans to release its results for the first six months of the year on 21 November. Its shares closed marginally lower yesterday, at R30.07, a drop of 0.73 per cent or 22c.
Most of the badly run CDMA operators in Nigeria have either folded up or are currently struggling to keep their heads above waters. The stiff competition from the GSM operators has made matters worse for their lack aggressiveness and unsustainable business strategies. Of the pack, only Visafone and Starcomms are current market leaders in that segment of the Nigerian telecom market. Intercellular and Zoom mobile are believed to have been consumed by the dynamics of the market.
The company last week issued a further trading update for the first six months to end September. Telkom said headline earnings per share from continuing operations will be between 33 per cent and 38 per cent lower, while basic earnings from continuing operations will drop by between 68 per cent and 73 per cent.
A year ago, Telkom reported normalised operating revenue down 5.4 per cent, to R17.6 billion, while normalised headline earnings per share from continuing operations declined 5.3 per cent, to 265.7c, and normalised basic earnings per share from continuing operations were 6.8 per cent lower, at 260.2c. Multi-Links, Telkom’s troubled Nigerian operation, which was sold on October 3, made an operating loss of R269 million. It is reported as a discontinued operation. Telkom said the sale will result in a net loss of about R1 billion, mostly because of the “cumulative amount of exchange differences”, which was previously recognised in non-distributable reserves, but are now being realised.
In June, Telkom said it would sell the Multi-Links business to an associate of former adversary Helios Towers Nigeria for $10 million (R68 million). The previous intended sale of the CDMA unit to Visafone for $52 million (R350 million) fell through because all the conditions were not met.
The loss on the sale will be recognised in the second half of the financial year. In September, Telkom said Multi-Links’ operating loss would be around R200 million, and it would lose R650 million on the sale.
At the time of the sale announcement, chairman Lazarus Zim said it was a “win-win” deal that would benefit both sets of shareholders.
Telkom bought 75 per cent of the company in May 2007, for R1.96 billion. In January 2009, it bought out the balance of Multi-Links for a further R1.224 billion. It has written it down by more than R5 billion in total.
Telkom plans to release its results for the first six months of the year on 21 November. Its shares closed marginally lower yesterday, at R30.07, a drop of 0.73 per cent or 22c.
