Despite a prevailing challenging operating environment, telecoms company Telkom, which has announced that it is in negotiations regarding a possible acquisition, managed to increase its revenue by 4.7% year-on-year to R21.5-billion for the six months ended September 30.
However, headline earnings a share were down 34.6% to 187.7c apiece in the interim period under review, mostly owing to a lower profit before tax.
The board declared an interim gross ordinary dividend of 73.17c apiece.
The group’s earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 12.4% year-on-year to R5.6-billion in the reporting period.
Excluding the impact of the International Financing Reporting Standards 16 accounting standard, group Ebitda decreased by 4.4% in the period under review.
Earnings and free cash flow were impacted by a one-off cost related to the use of two roaming partners in the period.
Telkom’s profitability was affected by capital investments, higher hedging costs, higher finance charges and fair value movements linked to foreign exchange adjustments.
“Profitability was affected by deep investments in future growth, particularly in the mobile business, which is building critical mass and continues to gain market share as consumers search for value,” said CEO Sipho Maseko.
He added that, with consumers being under immense pressure as the economy struggles to gain traction, it marked an important period for the group.
“We have made progress on our strategy and laid the foundation for growth, particularly as the economy starts to turn, and if government licences spectrum in a way that stimulates competition.”
Meanwhile, the main driver of the company’s revenue growth was mobile service revenue, which increased by 56.6% year-on-year to R5.6-billion, as subscriber numbers surged by 75% to 11.5-million.
“Our mobile business remains the fastest growing business in the country, with market-share gains underpinned by the company’s affordable broadband-led propositions,” Maseko pointed out.
Ongoing investments in new revenue streams continue to drive the overall growth of the company, although its deliberate strategy to accelerate the migration to new technologies had affected profitability in the short term.
The strategy to migrate customers to next-generation technologies contributed to a 19.1% decline in fixed voice and interconnection revenues across the group.
Despite this, Openserve and BCX’s overall revenue declined by 8.5% and 3.3%, respectively, despite growth in new revenue streams.
In the reporting period, Telkom’s mobile business had increased coverage by growing its portfolio of mobile base stations by 24.9% to 5 476, and by implementing the new roaming agreement to supplement the business’ own network.
Simultaneously, more than 300 000 customers had been migrated from copper-based services to fibre and long-term evolution over the past 18 months.
Further, the group’s strategy to separate the real estate property portfolio to increase management focus was yielding good results. The Gyro business contributed positively to the group through an 11.8% increase in masts and towers revenue.
Telkom’s sustainable cost-management programme delivered positive results, with underlying group operating expenses held flat compared to the prior period in an inflationary environment. This was pronounced in BCX, where Ebitda grew 26.1% on a standalone basis following an organisational restructuring in the prior period.
Owing to its investments in the future, the group’s net debt to Ebitda ratio increased to 1.4 times. The growth in borrowings was in line with Telkom’s strategy to fund capital expenditure through long-term debt as the group moved to an optimal capital structure.
“The operating environment remains challenging, but the imminent licensing of new spectrum, coupled with macroeconomic reforms and the investments we continue to make in our own business, means we are optimistic about the years ahead.
“We have shown our commitment to South Africa by investing into the economy at a time when the country needs it most. We are confident that these investments will pay off,” said Maseko.