Telkom Raises Dividend by Record as New Growth Phase Begins

(Bloomberg) -- Telkom SA SOC Ltd. raised the full-year dividend by a record as South Africa's biggest landline provider enters a new phase of growth by giving more autonomy to its four business units.

The annual payout to shareholders increased 56 percent to 4.22 rand a share, the Pretoria-based company said in a statement on Monday. Earnings per share excluding one-time items increased by 12 percent to 7.31 rand in the year through March, while operating revenue gained 9.8 percent.

“We have provided more clarity on our dividend in that we will pay shareholders 60 percent of headline earnings,” Chief Executive Officer Sipho Maseko said by phone. The integration of 2015 acquisition BCX into the business-to-business division and the accelerated growth of the mobile-phone unit helped drive the earnings increase, the CEO said.

Following a three-year turnaround strategy that returned Telkom to profit, Maseko is giving the company's four business units more independence to further boost earnings. The phone operator, almost 40 percent owned by the South African government, started a mobile unit, the country's fourth biggest, to sit alongside landline and internet services in a retail division. BCX, which provides IT services to corporate customers, a real estate portfolio and wholesale broadband make up the other three units.

Telkom Said to Split Company Into Four Units to Boost Profit

Telkom shares rose 2.3 percent to 77.74 rand as of 10:01 a.m. in Johannesburg and have soared more than 400 percent under Maseko's watch. That values the company at 41 billion rand ($3.2 billion).

The phone operator has done “a number of smaller acquisitions” to build out the BCX business, Maseko said. That's to add customers in different industries, including retail, health and mining. The broadband business will enable fixed line and mobile customers to stream video, he said, and the company has content-sharing partnerships with Netflix Inc. and Naspers Ltd.'s Multichoice.

Capital expenditure increased 43 percent to 8.7 billion rand as the company invested in fiber networks and the wireless business. Mobile subscriber numbers rose by 48 percent to about 4 million.

“Splitting the reporting of the business units will provide shareholders with more clarity on which company is contributing what to earnings,” Maseko said.

To contact the reporter on this story: Loni Prinsloo in Johannesburg at lprinsloo3@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, John Bowker, Paul Richardson