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Telkom considers non-cash impairment of legacy assets

Telkom has today announced that its board of directors is considering impairing the carrying value of the Group’s legacy network.

For considerable time the price at which Telkom shares have been trading has been significantly lower than their net asset value ("NAV"). At the last reporting date, 30 September 2012, the NAV per share was R57. As cited by IAS 36, when the carrying value of an entity’s net assets is more than their market capitalisation, it is an indication that the carrying value of the assets may be impaired.

Telkom, in line with other fixed line incumbents globally, has for more than a decade, faced technology changes, competition from mobile operators and an evolving regulatory landscape which have contributed to lower investment returns from its legacy network assets. The Group continues to invest significant capital into upgrading its fixed and mobile network to meet the increasing needs of customers, particularly regarding data transmission. The migration of services from legacy assets to superior Internet Protocol-compliant assets will rapidly escalate over the next few years, ensuring services remain differentiated from competitors and competitively priced. This transition will also enable the Group to improve operational efficiency, as it is a major benefit of new technology.

"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,” said Sipho Maseko, group chief executive officer at Telkom. “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."

A non-cash impairment charge, that may follow the review by the Board, will not impact on the significant cash flow which the Group generates from its operations. A non-cash impairment charge is akin to an accelerated depreciation charge, which has no impact on Telkom’s strong cash position, low indebtedness and ability to fund its capital programme from its own resources.

The quantum of the non-cash impairment charge cannot be confirmed at this stage. Once the Board has made a decision on a possible non-cash impairment the impact on earnings will be duly communicated to the market.

Telkom will release its results for the year ended 31 March 2013 on 14 June 2013.

For further enquiries, please contact:

Telkom Park, The Apex 92 Oak Avenue Technopark Highveld Centurion

As of 30 September 2015, we had approximately 3.3 million telephone access lines in service and 1,030,441 ports connected via MSAN access. We offer business, residential and payphone customers a wide range of services and products, including:

• fixed-line retail voice services using PSTN (Public Switched Telephone Network) lines, including ISDN (Integrated Services Digital Network) lines, and the sale of subscription based value-added voice services and calling plans;
• fixed-line customer premises equipment rental and sales services both voice and data needs and these include PABX, Computers, Routers, Modems, Telephone handsets and other ancillary equipment;
• interconnection services, including terminating and transiting traffic from South African mobile operators, as well as from international operators and transiting traffic from mobile to international destinations;
• fixed-line data services, including domestic and international data transmission services, such as point-to-point leased lines, ADSL (Asymmetrical Digital Subscriber Line) services, packet-based services, managed data networking services and internet access and related information technology services;
• Data Centre Operations includes e-commerce, application service provider, hosting, data storage, e-mail and security services;
• W-CDMA (Wideband Code Division Multiple Access), a 3G next generation network, including fixed voice services, data services and nomadic voice services;
• mobile communication services, including voice services, data services and handset sales through our mobile navbar-brand called Telkom Mobile;
•  information and communication services including cloud services, infrastructure services, workspace services, global service integration management and hardware and network equipment sales locally, in seven African countries, the UK and Dubai through Business Connexion Group; and
• other services including directory services, through Trudon (Pty) Ltd, wireless data services, through Swiftnet (Pty) Ltd.

Convergence is one of our key strategic initiatives in building a sustainable future for Telkom.  We will lead the provision of converged services in South Africa in support of our mission statement: Seamlessly connecting people to a better life.