Mobile a highlight in tough year for Telkom

Sipho Maseko

Telkom had a tough 2018 financial year, with group revenue flat compared to 2017 and headline earnings per share sinking by 18.4%. Mobile services were a highlight, while pressure on the fixed-line business and IT services subsidiary BCX, along with higher corporate taxes, took a toll.

The JSE-listed telecommunications group cut its annual dividend by 16.3% to R3.55/share.

“We felt the impact of the weak economic environment as the private and public sectors respectively deferred and lowered their ICT spend. This impacted Telkom’s performance, particularly in BCX, which serves the business sector,” said group CEO Sipho Maseko. He blamed the weak economy, which has led to big companies and government reducing their spend, negatively affecting BCX.

“The year was characterised by a tough economic environment, political uncertainty and intense competition as well as the consequent low business and consumer confidence.”

Group revenue was flat at R41bn, though mobile service revenue was again the biggest highlight, up 47.2%. The growth in the mobile business was underpinned by capital investment, extension of distribution channels, increased store footprint and new data-led products that resonated well with customers, Telkom said.

“Our mobile business is now a key driver of growth in the group, offsetting the decline in BCX and Openserve,” Maseko said.

Price reductions at Openserve, Telkom’s wholesale division, are “starting to bear fruit”, with the rate of decline in revenue slowing to 2.9%, he added.

Not surprisingly, the voice business remains under considerable pressure as companies continue switching to cheaper voice-over-IP options. “We have implemented strategies to manage the decline in voice revenue while we migrate customers to VoIP and grow our new-generation revenue streams.”

Maseko said new revenue streams, including mobile and data, are now compensating for the decline in the traditional business. “Our focus going forward is to increase the contribution from the new-generation revenue streams,” he said. “Despite their lower margin compared to traditional revenue streams, these revenue streams will ensure Telkom’s long-term sustainability.”

Telkom invest R7.9bn in its network in 2018, or 19.3% of revenue. Mobile and fibre remain key capex focus areas. The attach rate on fibre climbed to 30.7%, meaning nearly a third of homes and businesses passed by Openserve fibre have signed up for services.  — © 2018 NewsCentral Media