June 22, 2020 / 6:45 AM / 12 days ago

UPDATE 2-S.Africa's Telkom axes dividends for 3 years after profit slide

(Writes through, adds quotes, mobile tower and portfolio plans)

JOHANNESBURG, June 22 (Reuters) - South African telecoms provider Telkom suspended dividends for three years on Monday, aiming to conserve cash after a 66% slump in full-year earnings and ahead of this year’s planned auction of radio frequencies.

Telkom is undergoing a restructuring of its business as it grapples with declining performance in fixed-line voice services and a shift in demand to mobile data and fibre networks.

“The imminent spectrum auction will require a substantial amount of capital and it is of strategic importance for Telkom to participate to ensure the sustainability of the mobile business,” it said in its full-year results statement.

The retained dividend cash will also be redirected towards the company’s capital expenditure programme.

Telkom declared a dividend of 50.08 cents per share for the year to March 31, but said its next three annual payouts would be suspended. The operator of South Africa’s biggest fixed-line network also withdrew its medium-term targets, citing exceptional economic weakness and heightened uncertainty.

Shares in the company were down 5.6% at 25.98 rand by 1234 GMT.

Telkom aims to build 1,000 new mobile telecoms towers in the next three years, with 600 sites in the new-build pipeline, it said.

“We believe that South Africa is expected to show strong demand for towers over the next 10 years ... driven by increasing data consumption and the introduction of new technologies such as 5G,” Group Chief Executive Sipho Maseko said on a conference call.

The company warned that current market conditions have made it more challenging to dispose of non-core properties at satisfactory prices. This will be exacerbated by the economic impact of the coronavirus crisis, it added, meaning it might not dispose of further assets in the next financial year.

Telkom reported a 66% slump in headline earnings per share (HEPS), the main profit measure in South Africa, citing one-off costs attributed to job cuts and the coronavirus crisis. ($1 = 17.3732 rand)

Reporting by Nqobile Dludla Editing by David Goodman

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