JOHANNESBURG, June 14 (Reuters) - Shares of South Africa’s Telkom SA rose on Friday as investors bet the fixed-line operator may be on the path toward recovery after a 73 percent drop in full-year profit.
Telkom has written down the value of its network by 12 billion rand ($1.21 billion) and agreed to settle some longstanding regulatory disputes, as new chief executive Sipho Maseko looks to convince the market it has turned the corner.
Telkom, in which South Africa’s government and pension fund hold a combined majority stake, has lost three quarters of its market value in nearly six years, hit by competition from mobile operators MTN and former unit Vodacom.
“We’ve had a bit of a tough time over the last few years and we want to just reset exactly who we are,” said Maseko, Telkom’s sixth chief executive since 2005.
Shares of Telkom were up 5 percent at 16.10 rand at 1434 GMT.
“The real concern is the majority shareholder in government which has really put a spanner in the works in terms of enabling the company to turn around,” said Nic Norman-Smith, chief investment officer at Lentus Asset Management in Johannesburg.
Pretoria last year blocked a $385 million offer from South Korea’s KT Corp for 20 percent of the company. The ruling African National Congress sees Telkom as a critical asset in its plan to roll out internet service to the poor.
Telkom said headline earnings per share totalled 87 cents in the year to end-March, down 73 percent from a year earlier, hit by lower revenue and costs of an employee severance programme.
Headline earnings, the main measure of profit do not include certain one-time items. Including the cost of the network write-down would put Telkom at a loss of 11.7 billion rand for the year.