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Telkom Q1 revenue increases, as legacy, loadshedding impacts Ebitda

1st August 2023

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

     

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JSE-listed Telkom has posted a 4.2% decline in group earnings before taxes, depreciation and amortisation (Ebidta) for the first quarter of the 2024 financial year amid the continued decline of legacy revenues and higher direct and operating costs.

The group’s Ebitda for the quarter ended June 30, 2023, was R2.23-billion, while its Ebitda margin contracted by 1.7 percentage points to 21%.

The company’s reduced employee costs following the restructuring exercise were partly offset by additional spend on diesel to mitigate the impact of loadshedding and a slight increase in direct costs.

“The cost of loadshedding has now largely been incorporated in our operating cost base but will continue to impact group profitability,” said Telkom Group CEO Serame Taukobong.

Further, the group reported an increase in the provision for bad debts, as consumers remain under increasing strain from the macroeconomic environment.

Despite this, Taukobong said that Telkom has started the 2024 financial year with good momentum.

“Group performance was pleasing in the face of [continued loadshedding], muted economic growth, continuing inflationary pressures on consumers and an intensely competitive landscape.”

Revenue increased 3.8% to R10.66-billion, driven by the continued uptake of new generation network (NGN) products by customers as well as increased data traffic.

“We focused on offering attractive value propositions to customers in our mobile business which increased subscribers and data use, while the focused smart deployment of fibre infrastructure saw Openserve sustain growth in all three NGN customer segments – broadband, carrier and enterprise.”

Telkom’s subscriber base increased 6.9% to 18.5-million, with a blended average revenue per user of R83, while increased demand for connectivity was experienced during the quarter under review, with double-digit growth in data consumption.

Mobile revenue increased 5.2% to R5.45-billion during the first quarter of the year, with mobile service revenue increasing 6.5% to R4.56-billion.

Mobile data revenue expanded 9.9%, while fixed data NGN revenue growth in the group’s fibre business increased 10.6%.

Openserve’s fixed data new generation revenue growth was sustained at 10.6%, the company reported.

Openserve increased the number of homes connected by fibre by 24.2% to reach 515 201, with a connectivity rate of 46.5%, as the homes passed increased 24.4% to 1.11-million.

“Fixed data NGN revenue increased by 10.6% underpinned by growth in broadband (up 21.5%), carrier services (up 6.3%) and enterprise services (up 3.3%). The NGN portfolio now comprises 73.7% of total revenue,” the company outlined in its trading update, published on Monday.

The accelerated decline in total fixed voice revenue of 29% remains a challenge, which resulted in an overall revenue decline of 2.7% for the quarter to R3.13-billion.

“Demand for IT hardware and software at BCX was healthy as the fulfilment of orders improved along with new orders. Performance was however impacted by legacy and fixed voice revenue declines caused by ongoing migration to NGN technologies across our businesses, as anticipated,” Taukobong said.

Revenue increased 2.9% to R3.5-billion in the first quarter, largely driven by the 17.5% growth in the IT business to R2.07-billion, slightly offset by declines in the Converged Communications business, the revenue of which declined 12.8% to R1.43-billion

Swiftnet revenue, meanwhile, increased 1.2% to R326-million, underpinned by escalations, new tenancies, customers' fifth-generation rollouts and existing tenant installation upgrades.

“Telkom is committed to realising the intrinsic value of underlying businesses that make up the Telkom group. During the previous calendar year, a multi-party sales process commenced following the board's approval to affirm and realise the value of Swiftnet through the disposal of the mast and towers business,” Taukobong noted.

Telkom is currently engaged with two bidders from the various offers to acquire Swiftnet, which were refined from shortlisted bidders over recent weeks.

Further, Telkom continues to investigate the possible introduction of a strategic equity partner in BCX to enhance scale, growth and capabilities in various growth areas including cloud services and cybersecurity.

“A process is currently underway to assess the market for potential international and/or local partners and to consider available options in this regard,” he concluded.

Edited by Creamer Media Reporter

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