Telkom to start paying dividends to shareholders

TELKOM plans to reinstate dividend payments at the end of the 2015 financial year as its turnaround strategy starts paying off.

The company has ended a two- year streak of losses‚ although its fixed-line voice business is still under pressure and for the first time its fixed-line data was down 1.1% to R10.3-billion. Shareholders last received dividends at the end of the 2011 financial year.

Chief executive Sipho Maseko said on Friday that the business would have to deliver a strong performance for shareholders to get a decent dividend.

The planned reinstatement of dividends was a very positive decision‚ the head of equities and portfolio management at JM Busha Asset Managers‚ Farai Mapfinya said. "The company's capital allocation has been very poor historically and we believe investors will take great comfort in getting cash shareholder returns.

"While capital expenditure intensity was fairly high in the reported period‚ we see that declining in the near term‚ and the improvement in Telkom Mobile losses bodes well for the company in terms of free cash flows and the likelihood of a sustainable dividend flow‚" Mapfinya said.

Telkom's headline earnings per share‚ excluding e-off items‚ increased 35% to 388c for the year to March.

Since joining Telkom in April last year‚ Maseko has been implementing a multiyear turnaround strategy that he hopes will revive Telkom's fortunes.

Telkom said it had been experiencing significant challenges and continued to suffer declining revenue and rising costs. "This makes for an unsustainable financial position‚" the company said.

Maseko's strategy has resulted in‚ among other things‚ the disposal of loss-making business iWayAfrica‚ voluntary packages to more than 1000 employees and transferring the management of its mobile network to MTN‚ which will significantly reduce costs for Telkom Mobile.

Telkom will further cut its staff numbers‚ especially at management level‚ by August as it plans to flatten and reduce the layers between management and consumers‚ in a move to improve customer service. "The turnaround depends largely on improving customer service‚" Maseko said.

Telkom reported marginal growth of 1.1% in revenue to R32.4-billion despite a decline in the fixed-line business‚ noting that it would still face significant issues largely as a result of the continued pressure on voice revenue‚ resulting from fixed-to-mobile substitution‚ Maseko said. - Thabiso Mochiko