More Africa NewsSouth Africa: Telkom sees boom in mobile, fibre services

February 8, 2022by myles0

JSE-listed telecommunications group Telkom has seen growth in its mobile and fibre businesses.

The company this morning released a trading update for the quarter ended 31 December 2021, which shows active mobile customers up 10% year-on-year to 16.4 million, with blended average revenue per user (ARPU) of R91.45. Both the prepaid and postpaid bases saw an increase in the period under review.

Prepaid customers grew 12% year-on-year to 13.8 million, while postpaid ARPU grew 1.8% year-on-year to R215, with a marginal increase in postpaid customers to approximately 2.6 million.

Mobile data traffic increased by 7.9% year-on-year to 246 petabytes, supporting mobile data revenue growth of 2.6% year-on-year to R3.1 billion.

Mobile broadband customers were up 4% to 10.5 million, representing 63.6% of active customers.

Telkom notes the number of homes passed with fibre grew 65.5% year-on-year to 801 084. The number of homes connected with fibre grew by 38.6% to 358 528, representing a fibre-to-the-home (FTTH) connectivity rate of 44.8%.

Fixed traffic surge

The telco says total fixed traffic increased by approximately 23% to 428 petabytes.

Group earnings before interest, taxes, depreciation, and amortisation (EBITDA) was up 5.4% to R.8 billion, with EBITDA margin expansion of 1.9 ppts to 26.7%.

Total expenses were down by 4.9%, with operating expenses declining by 7.7%, while mobile cost to serve ratio was optimised from 30.9% in the prior year to 26.9%.

On a normalised basis, group EBITDA declined 1.4% as cost savings were not sufficient to offset a decline of 2.3% in group revenue.

Says group chief executive officer Serame Taukobong: “Telkom published its trading update for the third quarter of the year, demonstrating solid performance in the broadband market despite an intense competitive landscape.

“Our wholesale business, Openserve, continued with its growth trajectory in the fibre market. In line with its strategy to accelerate the FTTH footprint while simultaneously focusing on connecting a home, Openserve grew homes passed with fibre by 65.5% year-on-year to 801 000, while increasing the number of homes connected with fibre by 38.6% year-on-year, representing a connectivity rate of approximately 44.8%.”

Taukobong points out the lower connectivity rate compared to the prior year reflects the lag between passing and connecting a home.

He says mobile broadband demand continued to grow from the significantly higher volumes seen in the prior year. Mobile traffic grew 7.9% year-on-year from a higher base to 246 petabytes, supported by year-on-year growth of mobile broadband customers.

“To date, total broadband customers (fixed and mobile) increased by 3.3% year-on-year to 11 million,” says Taukobong.

“Notwithstanding the operational performance, our group revenue was under pressure in Q3 FY2022. Our mobile and masts and tower businesses continued to grow, sustaining the higher levels demonstrated in Q3 FY2021. However, this was offset by the ongoing challenges in the legacy business and IT business.”

Noteworthy, he says, despite group revenue being under pressure, the 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.

According to Telkom, the company’s digital and fintech revenue streams are starting to gain momentum.

It explains that fintech products and channels provide avenues to de-risk core business, extend sales channels and offering new revenue.

“With data being at the core, we will maintain a value-driven pricing strategy and offer segmented value propositions. We are continuing our improvement in customer experience and aim to grow our non-connectivity/application services revenue with a focus on fintech, smart home and content.”

BCX woes persist

It notes that subsidiary BCX remains under pressure. In Q3 FY2022, BCX revenue declined by 3.6% to R3.7 billion because of global supply challenges.

“Global challenges, such as the global chip shortage and shipping delays, exacerbate backlogs and offset any relief from the waning COVID-19 conditions. After the likely slight rebound in GDP for 2021, we cautiously anticipate that our stable corporate client base will review ICT projects that were previously delayed due to the pandemic.”

Swiftnet revenue increased by 4.6% to R317 million and the EBITDA margin decreased marginally by 0.4 ppts to 78.5%.

Telkom says the tower build programme remains on track, with 56 towers constructed in Q3 FY2022, amounting to 114 towers constructed in the financial year.

“We continue to advance development partnership opportunities with experienced property investors for select property development opportunities which are in the investment decision and pre-construction phase.”

Telkom says it supports the release of spectrum. “It should be released as soon as possible following a lawful, reasonable and fair process. The release of spectrum must promote effective competition for the benefit the consumer, the sector and economy. As such, Telkom has requested an expedited review of the currently flawed process. Subject to the directions of the court, Telkom has requested the review be heard on 1-4 March 2022.”


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