Telkom FY Revenue Stable, Free Cash Flow Improves

outh African operator Telkom announced group revenue of ZAR 41 billion for the financial year ended 31 March, flat compared to the previous year. EBITDA decreased by 3.6 percent to ZAR 10.54 billion, giving an EBITDA margin of 25.7 percent, and HEPS decreased by 18.4 percent to ZAR 5.97 per share, hurt by a higher tax rate.

Free cash flow increased to ZAR 501 million from a negative outflow of ZAR 137 million the previous year thanks to lower capex and better working capital management. Telkom still reduced its dividend, to 355 cents per share from 422 cents last year.

The company said growth in the mobile business was underpinned by capital investment, extension of distribution channels, increased store footprint and innovative data-led products which resonated well with customers. Mobile service revenue grew by 47 percent to ZAR 5.15 billion, and the company ended the year with 5.21 million active mobile subscribers versus just under 4 million a year earlier. ARPU was up 10 percent year-on-year to ZAR 98.19, helped by a more than doubling in mobile data traffic.

Fixed service revenue fell 4.7 percent to ZAR 23.2 billion, hurt by tough economic conditions, political and policy uncertainty and intense competition which contributed to weak business and consumer confidence. Fixed broadband subscribers fell by 2.2 percent over the year to 981,000, and the number of access lines dropped 9.3 percent to nearly 2.7 million.

BCX performance was negatively impacted by both the weak economy and the decline in voice revenue from the connectivity business. At wholesale unit Openservce, the pricing transformation started on two years ago is starting to bear fruit, with the rate of decline in its revenue slowing significantly, Telkom said.

Telkom continued to invest in its network, with annual capex of ZAR 7.9 billion or 19 percent of revenue, in line with guidance. Capital investment was 8.6 percent lower than the prior year due to the revenue pressures and a focus on maximising capital returns. Telkom said its core and backhaul networks are largely modernised, and the group is completing the upgrade of the access network with multiple technologies.

The company ended the year with nearly 357,000 premises passed with FTTH, up from 220,000 a year ago, and FTTC reached 2.237 million homes, compared to 1.991 million a year earlier. Fibre penetration reached 30.7 percent, nearly double the year-earlier rate. The number of LTE network sites rose 39 percent over the year to 2,333. Telkom said it will continue to invest in multiple forms of access technology.

The results were in line with the company’s guidance, and Telkom forecast an improvement in the new fiscal year. Over the next three years, the company targets mid single-digit revenue growth, an EBITDA margin of 24-27 percent and capex of 16-20 percent of revenues.  – Telecompaper