South Africa: Telkom under pressure in fixed broadband

The number of fixed-line broadband subscribers on Telkom’s infrastructure has dipped back below a million, falling 1.9% year on year to end-September 2017, as competitive pressures in the fibre-to-the-home market intensify. However, its mobile business has continued to outperform.

Telkom had 999 000 fixed broadband subscribers at the end of September, down from just over a million a year ago, despite huge investments by wholesale arm Openserve to replace legacy copper DSL broadband infrastructure with high-speed fibre networks.

The number of fixed lines in service slumped by 8.1% to end-September, to 2.8m, from 3.1m previously. However, average revenue per user from fixed broadband rose by 7.6% to R346.30.

The mobile side of Telkom’s business continued to grow strongly, with the number of mobile broadband subscribers jumping by 25.2% year on year to 2.8m. Mobile service revenue rose 43.2% to R2.3bn.Telkom is facing a big challenge in the fixed-line broadband market, a segment in which it previously enjoyed a monopoly. Rivals such as Vumatel are racing to wire up the cities to alternative fibre infrastructure.

Telkom has cut its interim dividend by 9.9% as weak economic conditions put pressure on the top line and on operating margins. Headline earnings per share declined by 7.4%, while cash at the end of the period was R1.4bn, down 24.6% from September 2016.

Group operating revenue was R20.1bn, down 0.6% from last year’s result. Earnings before interest, tax, depreciation and amortisation declined by 1.9% to R5.2bn, while capital expenditure rose 9.2% to almost R4bn.

Telkom said it has been “disciplined” in extracting returns from its capital investment. “Mobile and fibre remain key capex focus areas and we have witnessed strong returns in the form of service revenue growth of 43.2 percent in mobile and an active connectivity rate of 24.5% for fibre.”

‘Tough economic environment’

The group spent R1.2bn on its mobile network in the six-month period, an increase of 56.3% over last year. It grew its number of sites by 24.1%.

“The first half of the year was characterised by a tough economic environment and increased competition,” said CEO Sipho Maseko in a note to shareholders. “We saw corporate businesses defer their spend on ICT as a result of an uncertain political, economic and policy environment.”

Maseko said business confidence “remains very low, with a lack of appetite for investment by corporate businesses”.

“Lower spend from government placed a further damper on ICT spend in the public sector.”

Source: NewsCentral Media

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