• Telkom has issued a trading statement ahead of its year-end financial results presentation, warning of declines in share earnings.
• In addition the board of directors is deliberating an impairment of its assets, namely OpenServe, Telkom Consumer, Gyro, and BCX.
• Telkom reports it has issued voluntarily severance packages to employees as part of a restructuring effort announced earlier this year.

Telkom is struggling, as technology moves forward constantly, the economy tightens and loadshedding interrupts operations.

This according to a trading statement Telkom issued this morning ahead of releasing its financial results for the financial year that ended on 31st March 2023.

This statement to shareholders makes for grim reading with the telco stating that it expects to report a decline in both basic earnings per share and headline earnings per share.

This decline, says Telkom, comes amid a migration to new generation technology, a deliberate upfront investment in working capital for handsets and equipment, inflation and loadshedding.

In addition the Telkom board is currently considering an impairment of assets for its cash generating units Openserve, Telkom Consumer, Gyro and BCX to the tune of R13 billion. The group says this is in pursuit of migrating to newer technologies.

“In line with the requirements of assessing and testing for impairment as per International Accounting Standard 36, Impairment of Assets (“IAS 36”), significant market changes and current economic conditions, including accelerated loadshedding, low anticipated economic growth rates and a high interest rate environment, coupled with evolving technological advancements have had an adverse effect on the Group. In terms of IAS 36, another factor that determines whether or not an impairment of assets is required is whether the carrying value of net assets is higher than the market capitalisation, which is the case for Telkom,” the telco told shareholders.

Loadshedding has proved incredibly problematic for South Africa’s telcos. Earlier this week Vodacom reported that it had spent R4.3 billion to survive rampant and pervasive power cuts. Earlier this year Telkom reported that loadshedding had forced it to spend R150 million more than it intended to in Q3 2022.

We expect that figure to be significantly more once the yearly results are published.

Because of all of these pressures, the company embarked on a restructuring in February which will impact 15 percent of the group’s workforce.

“In line with the consultation process with unions, Telkom extended voluntary severance packages and voluntary early retirement packages to all employees in the Group. The Group is currently engaging its social partners, including concluding organisational manning, and is on track to achieve the initial commitment. The cash outpayment relating to the restructuring will occur in the 2024 financial year,” Telkom said.

Telkom expects to publish its results on 13th June 2023 and if the above is anything to go by, it’s going to be hard to find some good news in those results.