Bloomberg News

Telkom South Africa Faces Moody’s Downgrade on Revenue Loss

June 30, 2011

(Updates with Moody’s comments from second paragraph.)

June 30 (Bloomberg) -- Telkom South Africa Ltd., Africa’s largest fixed-line phone operator, was placed on a review for possible credit-rating downgrade by Moody’s Investor Service, citing concern about revenue losses and competition.

“Telkom operations, strategies and market image has furthermore been impacted by a series of management changes in the past two years,” Soummo Mukherjee, vice president and senior analyst at Moody’s, said in an e-mailed statement.

Moody’s has a Baa1 rating on the company, the third-lowest investment grade bond. Telkom has three bonds outstanding, totaling 4.7 billion rand ($695.6 million), due between 2012 and 2020.

Since the company’s last downgrade in 2009, Telkom has suffered “more than originally anticipated” from its money- losing investment in Nigeria’s Multi-Links Communications Ltd., said Mukherjee.

Telkom bought the business in 2007, and invested a total 9.8 billion rand in the ensuing period, said Nombulelo Moholi, Telkom’s chief executive officer, in a June 13 interview. On June 28 the company announced an agreement to sell Multi-Links to Helios Towers Nigeria for $10 million.

Multi-Links was the subject of a $252 million liability claim at the high court of Lagos, Nigeria’s capital, by Helios, on a disputed lease agreement.

The company’s 11.9 percent bond due 2016 fell marginally to 107.498 rand, taking the yield to 9.5 percent, and extending yesterday’s 3.2 percent loss.

--Editors: Jim Silver, John Lear.

To contact the reporter on this story: Sikonathi Mantshantsha in Johannesburg at smantshantsh@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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