South Africa's Telkom delays mobile unit break-even forecast - CNBC Africa

South Africa's Telkom delays mobile unit break-even forecast

Southern Africa

by Reuters 0

South Africa's Telkom delays mobile unit break-even forecast. Photo: Pixabay

South African telecoms firm Telkom said its mobile unit would not reach break-even in March as it had forecast due to rising interest rates and cost pressures.

Telkom, in which the government owns a stake of about 40 percent, launched the business six years ago to offset declining sales from its traditional phone business.

But the unit has failed to mount a serious challenge in a market dominated by MTN Group and Vodacom.

"Our initial expectation that the mobile business would break even by March 2016, has been tempered by the operating environment and cost pressure," the company said on Monday.

Rising interest rates in Africa's most industrialised economy are expected to further squeeze consumers' disposable income, with heavy personal debt levels already high.

Shares in Telkom fell as much as 5 percent after the news, before recouping some of the losses to trade 3 percent lower at 62 rand as of 0939 GMT.

Telkom is nearing the end of the first phase of a turnaround strategy that includes cutting jobs, outsourcing services such as telephone directory printing and selling some properties in a portfolio whose size is slightly larger than Luxembourg.

Chief Executive Sipho Maseko's plan to boost the size of the mobile unit was dealt a blow late last year when talks to buy rival Cell C broke down.