Media reports have revealed that South Africa’s Telkom’s share price plummeted 30 per cent over the last month due to poor results and MTN walking away from talks to buy the operator.
Last week Telkom released a trading statement warning shareholders that its earnings for the six months ended 30 September 2022 will be much lower than the prior interim period.
The operator disclosed that headline earnings per share (HEPS) and reported basic earnings per share (BEPS) are expected to decline by between 45 per cent and 55 per cent.
Telkom attributed its poor performance to a changing mobile subscriber mix and higher maintenance and service costs.
The latest share price drop followed a 24 per cent decline in October after MTN announced it had walked away from talks to buy Telkom.
MTN allegedly stopped negotiations because Telkom could not guarantee exclusivity, and there were concerns about Competition Commission approvals.
Telkom has valuable assets, including spectrum, an extensive fibre network, and a great tower and property portfolio, but the market needs more trust in the company to unlock value, analysts say.
Nick Kunze from Sanlam Private Wealth said there are many reasons the market dislikes Telkom, and shareholders are dumping the stock.
Kunze said, “As much as its mobile business has grown, its recent earnings missed estimates, and it will battle to compete with the big operators.”
“Now that MTN has walked away, I don’t know what’s in the offing. A lot of the premium in the share price was due to takeover talk, and that’s unlikely to come back any time soon.”
Ashraf Mohamed from Cornerpiece Capital explained that Telkom started to move away from its legacy business with new fibre products.
However, competition increased with Vumatel, Vodacom, MTN, and Rain offering affordable broadband access, and Telkom has lost momentum.