More Africa NewsSouth Africa: Fixed lines are dying, but Telkom’s mobile business is on fire

November 10, 2020by myles0

Telkom on Tuesday said its mobile data revenue surged 54% in the first half of its 2021 financial year, supported by an 81% surge in mobile traffic.

However, it’s fixed-line business contracted sharply, losing more than half a million customers since the end of March as consumers ditched landlines for mobile services and as Telkom itself aggressively cut off expensive-to-maintain legacy copper connections in favour of fibre and fixed-4G/LTE alternatives.

Mobile customers climbed 19% to 13.7 million with net additions of 2.2 million subscribers, making Telkom the fast-growing large mobile operator in South Africa and placing it ahead of traditional third-placed industry player Cell C.

Telkom Mobile expanded margin by 13.2 percentage points to 29.9%, optimised direct its cost-to-revenue ratio from 53% in the prior period to 38%, and more than doubled its earnings before interest, tax, depreciation and amortisation to R2.9-billion.

Telkom attributed the strong growth in mobile traffic to the Covid-19 lockdown and associated work-from-home measures as well as online schooling.

Group operational performance was strong, with Ebitda climbing 6.3% to R5.9-billion, delivering a margin of 27.6%. Headline earnings per share spiked by 25.4%. However, network investment also fell during the period, with capital expenditure down almost a third to R2.9-billion.

Free cash flow

Adjusted free cash flow improved by R2.6-billion to R1.3-billion, compared to a negative R1.3-billion in the prior year. Revenue, however, fell by 0.4% to R21.4-billion.

“Telkom Mobile has performed exceptionally well, despite the negative impact of the national lockdown on parts of our business,” said CEO Sipho Maseko in a statement.

The BCX business did not fare nearly as well due to a decline in enterprise fixed-voice revenues. Enterprise customers reduced IT spend in the first half of the year and postponed some of their capital investment projects as a response to the heightened uncertainty caused by Covid-19. This resulted in BCX’s IT business revenue declining by 8.6%.

The decrease in fixed-voice volumes also impacted wholesale division Openserve negatively with revenue there declining by 13.6%, a shift driven by a 22.7% contraction in fixed voice revenue. However, Openserve grew the fibre attachment rate (the percentage of consumers who took up its home fibre services where these were available) to 53.8%.

The group had a cash balance of R3.9-billion at the end of September. It strengthened the balance sheet by repaying maturing debt of R900-million. Net debt to Ebitda improved from 1.3x at the full year to 1x now. 

Source: NewsCentral Media

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