Crippling power shortages hit South Africa’s Telkom Q3 profit

South African telecoms group Telkom said on Tuesday its third-quarter core profit declined by 13.5% as crippling power cuts inflated costs and impacted its service revenue.

The operator also announced a cost savings programme to improve profit, which drove its shares up 6.33% by 0921 GMT.

State electricity utility Eskom is implementing the worst rolling blackouts, or “load shedding”, on record, leaving households in the dark for up to 10 hours a day, disrupting manufacturing and hurting businesses.

The telecom industry specifically is having to crank up diesel generators to power its vast towers, rollout additional batteries and increase security at these sites to protect them from theft, additional costs that are putting pressure on their margins.

Telkom, majority owned by the government, said group earnings before interest, tax, depreciation and amortization (EBITDA) declined to 2.5 billion rand ($140.10 million) in the third quarter ended Dec. 31, contracting the EBITDA margin by 4.1 percentage points to 22.6%.

Group revenue grew by 2.3% to 11 billion rand, largely driven by growth in active subscribers, increased data traffic, higher handset and equipment sales to retail as well as increased IT solutions and products to enterprise customers.

Group CEO Serame Taukobong said despite good top-line growth and the optimisation of roaming costs, the migration of legacy products to newer technologies, investment in post-paid and the impact of power cuts put pressure on its costs, EBITDA and cash flows.

The blackouts resulted in a year-on-year increase of more than 150 million rand ($8.41 million) of additional costs for the quarter.

To deal with these costs and improve the group’s medium-term profitability, Telkom has initiated cost-saving programmes, with benefits expected to materialise over the next six to 18 months, Taukobong said. Reuters