Telkom to pay first interim dividend as recovery builds

JOHANNESBURG (Reuters) – Telkom SA, South Africa’s biggest fixed-line phone company, will pay its first ever interim dividend after reporting higher revenue and profit, and will continue to invest in its mobile business to boost growth, it said on Tuesday.

The company completed the turnaround phase of its strategy in June that includes cutting jobs, outsourcing services such as telephone directory printing and selling some properties. It is now focusing on growth.

Telkom, 40 percent owned by the government, declared a maiden interim dividend of 131 cents per share. In 2015, it paid a full-year dividend for the first time since 2011.

At 1355 GMT, its shares were up 7.1 percent at 63.96 rand.

“It’s a big step forward,” said CEO Sipho Maseko. “It gives our shareholders a lot of certainty. It enables us to attract a lot of value and long-term shareholders.”

Maseko took the helm three years ago to help turn around a company struggling with record losses.

Telkom said headline earning per share for the six months ended September rose 19.7 percent to 336 cents from 280.6 cents a year earlier. It has cut the workforce by 14.3 percent year-on-year to just over 12,000.

The company, which launched its mobile phone business five years ago, said that division contributed to core profit (earnings before interest, tax, depreciation and amortisation) for the first time.

“Our mobile business has been able to establish itself as a meaningful player in the market. We intend growing our scale in the mobile market through focusing on the post-paid and data market in which we are already making inroads,” said Maseko.

Telkom has been looking to boost its mobile business to offset the falling use of landlines. In 2015 it walked away from an acquisition of mobile firm Cell C after failing to agree a price.

With a strong balance sheet, Maseko said when the time was right, Telkom would look to make some strategic acquisitions.

The company increased capital expenditure by 55.8 percent to 3.6 billion rand in the half year to boost its mobile business and connect fibre networks to homes.

“When Sipho Maseko came through with the new board led by Jabu Mabuza, the market believed them. He followed through with the strategy that he had in mind,” said Momentum S.P. Reid Securities equity research analyst Sibonginkosi Nyanga.