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Telkom results show broadband strategy poised to deliver growth

Telkom SA SOC Limited published interim results for the six months ending 30 September 2022, reflecting a solid foundation for future broadband growth amid a tough operating environment characterised by constrained consumer spending and rising operating costs.

The Group delivered flat revenues as Telkom continues to execute its growth strategy of migrating to new technologies. This, coupled with changes in the consumer product mix and increased operating expenses including costs related to load-shedding, saw Group EBIDTA decline 17.3% over the period.

According to Telkom Group CEO, Serame Taukobong, total operating expenses increased by 5%. The increase stayed well below inflation, the main contributor to the rise in service costs is expenses to ensure uninterrupted service during load-shedding.

Within the Telkom Consumer Division, mobile customers are up 10.9% to 18 million subscribers, with 61.1% of customers using broadband services. Despite a 14.1% increase in mobile data traffic, mobile revenue from external customers remained flat at 2.3%. This was driven by changes in the product mix to ensure Telkom retains and grows mobile subscribers, while also retaining its value positioning of providing affordable services.

“The plan to stabilise Openserve, South Africa’s leading wholesale infrastructure connectivity provider, continues positively, with 65% of revenue now coming from next-generation products and services,” says Taukobong. “The growth in high-capacity links for carriers, an increase in demand for fibre services and growth in enterprise connectivity is also pleasing.”

Despite a 10.8% growth in next-generation revenue,” Openserve’s total revenue declined by 4.3%.

Furthermore, Openserve continued with its growth trajectory in the fibre market, increasing homes passed with fibre by 35.8% and homes connected with fibre by 33.7%. This aligns with Telkom’s strategy to accelerate the fibre to the home (FTTH) footprint while simultaneously focusing on connecting homes. Openserve currently has the highest homes connected ratio in the country at 46.2%.

BCX, the country’s leading information and communications technology (ICT) solutions provider, reported a flat 0.8% growth, boosted by a satisfactory 13.7% growth in IT business revenue. This segment was muted for the past two-and-half years as corporates reduced IT spend.

Swiftnet, the masts and towers business, recorded a 2.1% decrease in revenue to R660 million, driven by the impact of continued focus on modernisation from mobile network operator (MNO) customers.

“We expect modernisation to continue over the next year, coupled with the deployment of new base station sites as the MNOs deploy their respective newly acquired permanent spectrum allocations,” says Taukobong.

“The Group’s leadership team is laser-focused on delivering on our strategy to deliver shareholder value by ensuring long-term, sustainable growth,”

Management is continuing to explore various options of realising the value of the mast and towers business and will update the market in due course.

The decline in EBIDTA of 17.3%, partially offset by lower finance charges and fair-value movements, resulted in a decline in HEPS & BEPS of 51.9% and 52.5% respectively.

“During the period under review, capital investment increased by 2.2% to about R3.7 billion, as we continue to focus on investing in fibre and mobile, our key growth areas, says Taukobong. “We are confident of our ability to unlock value for shareholders as we achieve scale in newer technologies.”

CT Bureau

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