Telkom's Nigerian unit Multi-Links suffers R7.4bn loss

Telkom has announced losses of R7.4 billion on its Nigerian unit Multi-Links after failing to establish itself in the competitive market.

The South African government, which has a 38 percent stake in the company, said the money had been lost since it took over the unit in January 2009.

Communications Minister Roy Padayachie replied to South African lawmakers who questioned Telkom’s “failed efforts to gain ground” in Nigeria.

He stated: "Telkom underestimated the highly competitive nature of the Nigerian telecommunications market and also failed to build and manage appropriate distribution channels.”

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Multi-Links suffered an operating loss of R552 million for the 2009 financial year and R1bn for 2010, while Telkom also had to cut the Nigerian unit’s estimated value by R5.8bn.

The state “raised its dismay” over the losses in the 2010 shareholder’s meeting, according to Padayachie.

Telkom took complete control of Multi-Links in 2009 having bought an initial 75 percent stake in 2007. The R873m deal was said to expand the company’s footprint in Africa.

The code-division multiple access (CDMA) technology used by Multi-Links is thought to be the main reason for its downfall, with the majority of the market in the country using the global system for mobile communications (GSM) – which is not operable with CDMA phones.