Telkom First-Half Profit Rises as Costs Fall on Staff Cuts

  • More than 3,100 staff agree to leave the South African company
  • Mobile customers reach 2.2 million as Cell C deal explored

Telkom SA SOC Ltd., the South African fixed-line operator that’s in talks to buy mobile-phone company Cell C Pty Ltd., said first-half profit increased 14 percent as the company cut staff and reduced costs.

Earnings per share excluding one-time items were 2.81 rand in the six months through September, compared with 2.46 rand cents a year earlier, the Pretoria-based company said in a statement on Monday. Revenue rose 1.2 percent to 13.5 billion rand ($939 million).

“We continued with our efforts to transform Telkom and stabilize revenue, while at the same time addressing the fixed and inefficient nature of our operating cost base,” Chief Executive Officer Sipho Maseko said in the statement. “The challenges we faced during the period included increasing competition and a soft economy.”

Telkom is in talks to buy Cell C, the country’s third-largest mobile-phone company, to offset a decline in landline usage and increased operating expenses. Telkom, which is 40 percent owned by South Africa’s government, operates the nation’s fourth-largest wireless network behind market leader Vodacom Group Ltd. and MTN Group Ltd.

Telkom expects its mobile-phone unit to break even, on an earnings before interest, taxes, depreciation and appreciation basis, by the end of the financial year as revenue from the division rose 41 percent to 1.2 billion rand in the first half. Mobile subscribers increased 12 percent to 2.3 million, while fixed-line customers gained 4.2 percent to 1 million.

Net income fell 45 percent to 564 million rand as Telkom paid 1.5 billion rand to 3,108 employees who agreed to leave the company.

Before it's here, it's on the Bloomberg Terminal.