Telkom Plans Strategy Review After First Dividend Since 2011

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Telkom SA SOC Ltd., South Africa’s biggest landline provider, will pay its first dividend since 2011 and revamp its operations to revive falling earnings. The stock gained the most in more than two months.

The company will reorganize its consumer and wholesale business units into three parts focusing on residential users, corporate customers and networks, Chief Executive Officer Sipho Maseko said by phone on Monday. That should improve the efficiency of the company and boost the financial performance, he said.

“A major part of this review is looking at a deep functional separation between our wholesale and retail business,” Maseko said in the interview. “That’s the first intervention, to make sure that there’s a much clearer line of sight in terms of the performance of each and every business.”

Telkom is cutting jobs to reduce costs as consumers switch to data-enabled smartphones and tablets from landlines. The Pretoria-based company is also trying to increase profit at its mobile service, South Africa’s fourth-biggest, and boost sales of its Internet offering.

Telkom shares gained as much as 4.6 percent, the most since March 30, and traded 1.2 percent higher at 66.79 rand as of 9:58 a.m. in Johannesburg. That values the company at 34.9 billion rand.

Dividend Payment

The phone operator, about 40 percent owned by the South African government, will pay a combined ordinary and special dividend of 2.45 rand ($0.20) per share after debt declined 92 percent to 151 million rand, the company said in a statement on Monday. That will be the first dividend since a 1.45 rand payout four years ago and the biggest since 2009, according to data compiled by Bloomberg

Net income was 3.3 billion rand in the 12 months through March, down from 3.9 billion rand a year earlier, while fixed-line voice revenue fell 14 percent to 6.9 billion rand.

“We are still in the stability phase of our turnaround,” Maseko said. “We probably need another 24 months but so far the steps we have taken have enabled the firm to be stable,”

Maseko is trying to bring employee costs to 25 percent of sales from 29 percent currently, the CEO said. Full-year revenue rose 3.1 percent to 26 billion rand while staff costs fell 3.6 percent to 8.8 billion rand.

“That ratio needs to fall,” Maseko said. “If our revenues don’t improve we obviously have to be even more focused in getting efficiencies right.”

Telkom is still pursuing a network-sharing agreement with MTN Group Ltd., Africa’s largest phone company, even though the two South African operators have been in talks for more than a year, according to Maseko.

“All transactions that we commit ourselves too, we commit ourselves to them with gusto and energy,” he said. “It’s in the hands of the regulator and we will work with the regulator until the final decision is reached.”

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