Telecommunications group Telkom has reported a strong operational performance during the quarter ended December 31, 2021.

However, the JSE-listed company, in a trading update for the third quarter of the year, showed that its group revenue remains under pressure.

Group revenue for the third quarter declined 2.3% year-on-year to R10.8-billion, weighed down by its legacy business and information technology (IT) business.

Telkom’s Mobile business and Masts and Tower (Swiftnet) business both continued to grow during the quarter under review, growing 4.9% and 4.6% respectively compared with the third quarter of the prior year.

While the legacy fixed business continues to decline, the rate of decline has slowed down from double-digit decline in the prior year to 7.1% by the third quarter of the 2022 financial year.

The IT business remains challenged owing to the lingering impact of Covid-19 and the global shortage of chips which led to BCX being unable to fulfil backorders for IT hardware in the first nine months of the financial year.

“Despite group revenue being under pressure, our sustainable cost management continued to deliver efficiencies with operating expenses (opex) declining 7.7% year-on-year, far exceeding management’s target of containing opex growth below inflation,” said Telkom Group CEO Serame Taukobong.

Group earnings before interest, taxes, depreciation and amortisation (Ebitda) grew by 5.4% during the third quarter with the Ebitda margin expanding by 1.9 percentage points to 26.7%.

On a normalised basis excluding the impact of Voluntary Severance Packages/Voluntary Early Retirement Packages, the third-quarter group Ebitda declined 1.4%, as costs savings were not sufficient to offset the decline in group revenue.

The Consumer business revenue was relatively stable at R6.5-billion with a marginal decrease of 0.8% year-on-year.

During the quarter ended December 31, 2021, mobile service revenue increased 2.3% year-on-year to R4.4-billion, supported by a 10% year-on-year growth in active customers to 16.4-million.

“Despite the challenging environment, our postpaid customer base was relatively flat at 2.6-million, with postpaid average revenue per user (ARPU) up 1.8% year-on-year to R215. The prepaid market remains the driver of new connections, prepaid customers grew by 12% to 13.8-million,” said Taukobong.

Telkom reported 143 634 prepaid net additions, with prepaid ARPU declining 16.1% to R67.

Mobile data revenue increased 2.6% to R3.1-billion amid a 7.9% increase in mobile broadband traffic, while mobile broadband customers expanded 4% to 10.5-million, representing 63.6% of Telkom’s active customer base.

Meanwhile, during the quarter under review, BCX remained under pressure, with revenue declining by 3.6% to R3.8-billion owing to global supply challenges, such as the global chip shortage and shipping delays, which exacerbated backlogs and offset any relief from the waning Covid-19 conditions.

“The IT business is still the hardest hit during the constrained environment with the third-quarter revenue down 8.8% compared with the third quarter of the 2021 financial year. This stems mainly from the backlog in IT hardware owing to the global chip shortage impacting the manufacturing of IT equipment. We continue to retain our existing customer base,” he continued.

Openserve achieved revenue of R3.3-billion during the quarter under review, a 1.2% decline on the corresponding period last year.

Telkom has made significant progress on its fibre play, increasing fibre-to-the-home (FTTH) by 65.5% year-on-year to 801 084.

The number of homes passed and connected during the third quarter increased to 358 528, an increase of 38.6%, with a connectivity rate of 44.8%.

“The slight dilution in FTTH connectivity rate reflects a lag between passing and connecting a home. The increase in the number of homes connected with fiber-enabled Openserve to increase the services, consisting of broadband, voice, and other Internet Protocol security services. Our broadband connections on speeds of 10 Mb/s and higher improved by 11.4% with now more than 75% of our customer base using such speeds.”

In the Masts and Towers business, the growth trajectory was sustained, with Swiftnet increasing its revenue by 4.6% to R317-million.