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Telkom delivers H1 improvements

21st November 2023

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

     

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JSE-listed Telkom on Tuesday posted improvements across the board during the six months ended September 30, 2023, as it positions itself as an digital infrastructure business at its core.

During the first half of the year, the group’s earnings before interest, taxes, depreciation and amortisation (Ebitda) increased 1.7% to R5.025-billion, with the Ebitda margin contracting 0.2 percentage points to 23.1%.

Headline earnings a share improved 46.7% to 195c, while basic earnings a share increased 52.1% to 200.2c during the six months under review.

Free cash flow increased 130% to R573-million, excluding restructuring costs, and improved 74.9% to a negative R474-million including the restructuring costs and driven by significant working capital improvements.

Group revenue, meanwhile, increased 2.5% to R21.78-billion, driven by a 10.3% and 6.4% respective increase in mobile data and fixed data connectivity revenue and a 26.2% increase in information technology (IT) hardware and software sales revenue.

The overall revenue increase was partially offset by a 23.2% decrease in fixed voice revenue owing to the ongoing migration to modern technologies, such as fibre and long-term evolution (LTE), in addition to a 2.4% higher operating expenditure, a 10.6% increase in sales commission and incentives from mobile and a 2.7% increase in the cost of handset, equipment and directories mainly attributable to the increase in IT hardware and software revenue.

“These results show we are making steady progress executing our infrastructure-focused strategy under OneTelkom. The growth in our mobile and fixed data services demonstrates our investments in next generation technologies have also put us on the right path as data consumption continues to surge across our networks,” said Telkom Group CEO Serame Taukobong.

Telkom Consumer showed 10.3% mobile data revenue increase, 14.6% Ebidta growth and 22.9% mobile data traffic growth, with fibre revenue growth of 31.2%.

“Our subscriber base now stands at 18.3-million with a blended average revenue per user (ARPU) of R85. Our pre-paid customer base expanded by 1% to reach 15.3-million with an ARPU of R64, while the post-paid segment grew by 3.6%, reaching three-million with an ARPU of R182,” he said.

As Telkom continues to divest and manage the transition from legacy to next-generation technologies, its copper-based voice services now account for just 4.5% of revenue, a decrease from the previous year's 6.2%.

The mobile broadband subscriber base increased by 10.5% to 12.2-million, while wireless broadband users now make up 66.7% of the total mobile base.

Meanwhile, Openserve delivered an Ebidta margin improvement of 2.5 percentage points to 31.8%, while maintaining the highest connectivity rate in the market of 46.8%, underpinned by a 22.4% increase of homes connected to 542 598, while homes passed grew by 20.6% to 1 158 761.

During the six months under review, Openserve continued to transform its technology, revenue and channel mix, yielding a 6.9% increase in next-generation revenue to R4.53-billion and growing its next generation revenue contribution to total revenue to 74.4%.

Total operating revenue declined by 2.7% for the period as legacy revenue declines impacted performance.

BCX posted a 0.7% increase in revenue to R7.04-billion, mostly owing to the double-digit growth in the IT business, partially offset by legacy declines in the Converged Communications business.

The IT business revenue increased by 10.3% to R4.19-billion, driven by the strong performance of the hardware and software segment.

“Our strategy and performance continues to deliver industry-leading connectivity rates, enabling more South Africans access to affordable, high-speed Internet,” Taukobong said.

Telkom on Tuesday also issued a cautionary to shareholders as it entered exclusivity with a preferred bidder for the potential disposal of its towers subsidiary Swiftnet, which is in line with Telkom's strategy to focus on its core connectivity infrastructure and in line with sector trends.

The preferred bidder is a consortium of equity investors, including a black economic-empowerment partner, led and managed by a reputable private equity firm.

The negotiations to conclude transaction agreements are underway.

“We are encouraged by the progress made in the Swiftnet transaction which, when concluded, will enable us to strengthen our balance sheet and continue to execute our strategic goals,” he continued.

The company maintained its full-year guidance, while noting the challenging economic climate.

“Our performance shows we are focused on the right areas. Telkom continues to connect South Africans to a better life through our robust networks and advanced technologies,” Taukobong concluded.

Edited by Creamer Media Reporter

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