* Earnings seen up to 789 cents higher per share
* Shares add 5 pct
By Helen Nyambura-Mwaura
JOHANNESBURG, May 29 South Africa's Telkom SA
expects to post a nine-fold increase in 2013 earnings
following a raft of belt-tightening measures and a hefty
writedown the previous year.
The fixed-line telecoms company said on Thursday that
headline earnings for the year ended March 31 were likely to be
772 to 789 cents a share, compared to a restated 86.2 cents per
share a year earlier, and analysts will be looking closely to
see how much of that is the result of the aggressive turnaround
strategy introduced by Chief Executive Sipho Maseko.
Telkom formally reports its full-year earnings on June 13.
By shedding jobs, asking suppliers for discounts and cutting
back on expenses, Maseko, the sixth chief executive at the
state-controlled company since 2005, is aiming to cut 1 billion
rand in annual costs over the next five years.
Telkom's shares jumped more than 5 percent to 38.30 rand by
1207 GMT, having added as much as 8 percent earlier.
Johannesburg's All-share index was down 0.2 percent.
"That is what the market has been waiting for years. If
management is actually delivering on (the cost cuts), then the
market is really going to like it," said Reuben Beelders,
portfolio manager at Gryphon Asset Management in Cape Town.
Telkom also said it would benefit from lower depreciation
charges - the previous year's earnings were weighed down by a 12
billion rand ($1.1 billion) writedown - and by a one-time tax
benefit of 246 million rand.
However it was unclear where the bulk of the company's
savings came from as Telkom is not required to give details in
"The indication is that management are heading in the right
direction, but there are still a number of one offs in the
numbers," said Beelders.
"In order to really determine the sustainable earnings, we
are going to have a look at exactly where the improvement in the
operating margin and in the operating line is coming from."
Telkom's operating margin has averaged 12.9 percent over the
last five years, well below the 27 percent median of its two
main rivals MTN and Vodacom, according to
Thomson Reuters data. Return on equity was down 34 percent in
the last 12 months, compared with a rise of 43 percent for the
Telkom also said it received a boost from a decrease in
mobile termination rates, after South Africa's telecoms
regulator required operators to reduce the fees they charge one
another to connect calls across networks.
The Independent Communications Authority of South Africa
wants mobile termination rates at 10 cents by 2016 from 40 cents
now as part of a government push to reduce call costs in
Africa's most developed economy.
Telkom stands to gain from that because of the
disproportionately high calls from its landline network to
mobile phone operators such as MTN and Vodacom.
($1 = 10.4987 South African Rand)
(Editing by Sophie Walker)