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Subdued growth for Telkom as fibre connections surpass copper

By , Africa editor
Africa , South Africa , 09 Nov 2021
Serame Taukobong, Telkom group CEO designate.
Serame Taukobong, Telkom group CEO designate.

Telephony group Telkom recorded subdued growth in the six months ended September, supported by its mobile division, as well as the masts and towers business.

Telkom released its half-year results today, saying it performed well in the period, despite a challenging trading and economic environment.

For the six months, Telkom group revenue remained flat at R21.3 billion, mobile data revenue rose by 6.1% to R6.3 billion, while the mobile customer base increased 18.8% to 16.3 million.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) was up 1.2%, with the EBITDA margin at 28.1%, while headline earnings per share rose 30.4% to 285.5c and basic earnings per share surged 27.3% to 276.8c.

Addressing the key performance metrics of Telkom’s business units, the company says its consumer division continued to be the driver of growth in the group, with revenue increasing by 2.1% to R12.9 billion, powered by the mobile business.

This, Telkom says, was partially offset by the decline in fixed-line business due to continued migration to next-generation technologies, such as long-term evolution and fibre, and ongoing pressure in the SME segment.

Mobile surge

In the six months, mobile service revenue grew by 6.8% to R8.8 billion, supported by 18.8% year-on-year growth in active customers to 16.3 million.

Similarly, mobile data revenue grew by 6.1% to R6.3 billion, supported by 10.3% growth in mobile broadband customers to 10.6 million, which Telkom says represents 65.5% of its active customer base.

Telkom says: “This performance was delivered against a strong first half of the prior year, which saw a surge in data demand due to the pandemic.

“Driving the growth of adjacent revenue streams and opportunities remains a strategic imperative, which we are actively investing in. Included in Telkom Consumer revenue is content and financial services revenue of R388 million, which grew 23% year-on-year. This revenue is expected to continue to grow and will be a solid base from which to grow as we look to diversify revenue.”

Turning to Openserve, Telkom says the unit continued to stabilise in the six months, with its topline revenue slightly down by 1.8% to R6.7 billion, supported by the fibre ecosystem, including fibre to the base stations and fibre to the business.

“From a fibre-to-the-home perspective, the number of homes passed increased by 54.2% to 707 399, and the number of homes connected with fibre increased by 34.3% to 331 735. The 331 735 number of homes connected with fibre surpassed the number of homes connected with copper of 230 817,” says Telkom.

Further, in the six months to September, Telkom says the Gyro masts and towers (Swiftnet) unit increased revenue by 7.3% to R674 million, as it continued to commercialise its masts and towers business.

Gyro has 6 225 masts and towers, and is SA’s largest independently-run tower portfolio. The business is being prepared for listing on the Johannesburg Stock Exchange (JSE).

Almost three months ago, Telkom announced plans for a separate listing of the unit, as it seeks to unlock value for shareholders.

In September, the telephony group said the unit’s value is not fairly reflected in the Telkom share price, hence the move to list it separately.

Today, Telkom reiterated it is pursuing a separate listing of its masts and towers business on the JSE before the end of the financial year.

“Significant progress has been made, including, but not limited to, formal engagements with the JSE. Telkom believes a separate listing of Swiftnet will affirm the valuation of the masts and towers business and its contribution to the overall valuation of the Telkom business, thereby unlocking further value for Telkom.”

BCX woes persist

In the period under review, Telkom subsidiary BCX remained under pressure as a result of the overall market environment being challenging.

BCX’s revenue declined by 6.1% to R7.4 billion, with Telkom saying this was due to sluggish investments by corporates, as the country battles with the impact of the COVID-19 pandemic and the effects of restrictions on parts of the economy.

“The information technology business remains under pressure due to the lingering impact of the lockdown and the global supply chain constraints and shortages of semiconductor chips.”

Looking ahead, Telkom says the appointment of Serame Taukobong as group CEO designate will ensure continued execution of its strategy.

“The effective management transition is in place, with the appointment of the group CEO designate and the new CEO of Telkom Consumer.

“Given the challenges in the first half of the year, management will focus on growing the topline revenue and profitability in the second half of the year. Discipline in capital expenditure will continue to be exercised and we will focus on initiatives to improve cash generated from operations.”

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