Telkom South Africa writes down assets to tune of $1.2bn

South African operator Telkom has written down the value of its assets by R12bn ($1.2bn) following a review by its board. The operator said the decision to revalue it’s assets is important in enabling it to become competitive and efficient.

“We are committed to transforming Telkom’s financial performance,” said Sipho Maseko, group CEO at Telkom who took the over from former CEO Nombulelo Moholi in April of this year after leaving Vodacom, where he was COO. “This will require bold and decisive action. Tough and urgent decisions will have to be made, particularly regarding costs and the decommissioning of unprofitable services.”

Maseko added that the operator will accelerate the upgrade of its network in the medium term, and this will be essential for improvingservice delivery, efficiency and competitiveness.

The Telkom board explained that reasons it wrote down its assets, which included the extensive time period that shares have been trading at a lower value to its net asset value (NAV) and the fact that obsolescence of some of its legacy assets.

The migration of services from legacy assets to assets that are based on new technologies which will rapidly escalate over the next few years and further reduce the returns from some of the above noted legacy assets.

The impairment charge is a non-cash item and it will not impact the firm’s cash flow, said Telkom, adding that  after the impairment, the NAV per share is circa R34.

June 13, 2013 Written by Dawinderpal Sahota

This article first appeared on telecoms.com 

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Bharti Airtel’s acquisition of Warid Telecom could challenge MTN’s dominance in Uganda

By Danson Njue May 8, 2013

Bharti Airtel has recently signed a definitive agreement to acquire 100% of Warid Telecom Uganda in a move that will increase its market share to about 39.3%. Through the acquisition, Airtel will strengthen its position as the second-largest mobile operator in Uganda. According to Informa Telecoms & Media research, Airtel had 4.63 million subscriptions at end-2012, while Warid Telecom had 2.82 million. MTN was the market leader, with 7.7 million subscriptions and 40.67% share.

As the deal awaits approval from the regulator before the transfer of license is granted, concerns are rife about MTN’s dominance in a market with eight operators. The launch of two networks, K2 Telecom and Sure Telecom, at the beginning of the year caused a lot of concern from the large operators, which felt that the Ugandan telecoms market was perhaps too small for so many players. Some of them even concluded that the new operators would only contribute to the poor quality of telecoms services being experienced in the market. The new merger can therefore be seen as good thing after all.

In addition to boosting its subscription base, Airtel hopes to benefit from Warid’s network infrastructure and human capital to boost its growth and profitability in Uganda. However, the acquisition should not be looked at from a Ugandan or African perspective but more from a global perspective, as a strategy to expand Airtel’s position in the world’s mobile market. Bharti Airtel is the world’s seventh-largest operator, with more than 265 million mobile subscriptions at end-2012. In January 2010, it acquired 70% of Warid Telecom Bangladesh, in a deal whose value was not disclosed. It has recently announced plans to buy out the remaining 30% in a move to consolidate its position in Asia Pacific.

Airtel’s acquisition in Uganda is the first in-market consolidation in Africa’s mobile market. It also involves a larger operator buying out a smaller one. This might just encourage larger operators, especially in sub-Saharan Africa, to follow suit, so as to improve their profitability, which has been greatly affected by the 2010 price wars that saw operators reduce their call rates.

From a Ugandan-market point of view, the acquisition will be a game changer, accelerating growth through innovative products and services and improving overall quality of service. However, it might not challenge MTN’s dominance in Uganda just yet. MTN is reportedly evaluating possible mergers with other small operators in the country. It says that the only way to bring sanity to the Ugandan telecoms market is through consolidation to at most two main operators.

Re-produced from the Informa Telecoms & Media Analyst Blog - authored by:

Danson Njue

MEA

Areas of expertise: Analysis of mobile markets in Sub-Saharan Africa

“During 2013, operators in Sub-Saharan Africa will focus more on expansion of their mobile data networks to improve capacity and coverage. They will also increase their data offerings and promote smartphone adoption as a way of promoting data usage on their networks to boost service revenues. Operators will also be looking to evolve mobile-money platforms into integrated mobile financial systems capable of delivering multiple services to their customers.”

Danson Njue is a Research Analyst with Informa Telecoms & Media. He works as part of the Middle East and Africa team and has a key focus on mobile operator and vendor strategies in Sub-Saharan Africa. Danson tracks the growth of mobile and fixed telecommunication sectors as well as regulatory issues in the region. His recent research interests include mobile-broadband and mobile money strategies to grow operator service revenues in emerging markets.

Danson joined Informa Telecoms & Media in March 2011 as a Research Analyst. Prior to that, he was a Wireless Training Engineer at Huawei Technologies Limited where he conducted training on wireless Radio Access Network (RAN) technologies and offered customer support on wireless equipments. Danson has also worked as a Base Station Subsystems Engineer at Safaricom Limited where he was involved in the installation, commissioning and maintenance of radio access and transmission networks.

Danson holds a Masters degree in Telecommunication Technology and honours degree in Electrical and Electronics Engineering.

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