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.