Bloomberg News

Telkom Won’t Pay Dividend to Conserve Funds for Expansion

June 08, 2012

Telkom SA Ltd. (TKG), Africa’s biggest fixed-line telephone company, won’t pay a dividend for the year ended March 31 because it plans to use any funds for expansion.

“The ordinary dividend has been considered with reference to Telkom’s current and expected future challenges, performance, debt and cash flow levels,” the Pretoria-based company said today in a statement. “Telkom’s strategic objectives of network transformation and the building of its mobile business will see dividends being considered on an annual basis based on the performance of the group.”

Increased competition in South Africa and a failed expansion into Nigeria has cut profit excluding one-time items at Africa’s largest fixed-line operator every year since 2006. Telkom has paid dividends each year since 2004, with special cash payments in five of the six years through 2010. A final payout of 1.50 rand was expected, according to Bloomberg dividend estimates. Telkom posted a net loss for fiscal 2012.

“The company has been harvested for a long time and now there is nothing left to harvest,” Simon Fillmore, an analyst at Independent Securities (Pty) Ltd., said by phone from Johannesburg. “It has to start growing, and this will take significant capital outlay.”

KT Blocked

South Africa’s cabinet decided a week ago to block the planned 2.7 billion-rand ($321 million) sale of 20 percent of Telkom to KT Corp. (030200), South Korea’s biggest phone and Internet provider. The government, which owns 40 percent of Telkom, is considering a sale of stock to current Telkom investors or an increase in debt to help fund a return to profit, Communications Minister Dina Pule said on June 5.

The net loss attributable to shareholders in the 12 months through March 31 was 216 million rand versus profit of 1.22 billion rand in fiscal 2011, the company said in the statement.

Telkom gained 0.9 percent to 20.68 rand at the close in Johannesburg yesterday, paring its decline over the past five days to 9.7 percent, the worst performance on the 162-stock FTSE/JSE Africa All Share Index, which has gained 2.3 percent.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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