A recent downgrading by Bank of America-Merrill Lynch, reduced South Africa's incumbent, Telkom, rating from neutral to underperform and follows on from the sale of its stake in Vodacom, and halting of many of its capital expenditure projects, while its Nigerian subsidiary, Multi-Links, expends cash. The retention of approximately R9.6-billion from the sale of Vodacom, delay in the roll-out of the mobile network and data centre expansion and reassessment of the Multi-Links capital requirements has enabled Telkom to declare a special dividend but this has failed to ease market skepticism. In its latest annual results, the group reported a 30 percent drop in operating profits, largely due to its 3.9 percent slide in fixed- line call traffic. Crucially its acquisition of 75 percent of the Nigerian mobile operator Multi- Links in 2007 and subsequent purchase of the remaining 25percent earlier this year, the company has suffered enormous losses, with the average revenue per user plummeting from 32 to 9 in the 2008/2009 financial year. Expansion in the pan African mobile sector has also bitten Zain which is rumoured to be selling its interests across the continent to French operator Vivendi.
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