Telkom sees 40% surge in mobile service revenue

Telkom’s mobile business is still flying. In a financial update for the nine months to end-December 2020, published on Monday, the company said service revenue from mobile soared 40.7% year on year.

This helped ensure that group revenue rose, albeit only just at 0.9% to R32.4-billion. Dragging down the results was a shocking 26.2% decline in year-to-date fixed voice and interconnection revenue.

Ebitda, a measure of operational profitability, climbed by 8.5% year on year to R8.6-billion thanks to “sustainable cost management” measures. Capital expenditure was down from R5.5-billion to R5.1-billion, although there was an acceleration in the third quarter of the financial year.

Despite this, Telkom liquidity remained “healthy”, with a “stable balance sheet”. In the first nine months, Telkom generated free cash flow of R1.6-billion, up from R211-million reported in the first half of the 2021 financial year. Excluding the year-to-date costs associated with retrenchments and early retirement packages amounting to almost R1.3-billion, Telkom generated free cash flow, year to date, of R2.8-billion.

“The group delivered a solid set of results where growth was challenging due to Covid-19 and the strained South African economy. This was driven by robust mobile growth, solid sustainable cost management and strong free cash flow generation,” Telkom CEO Sipho Maseko said in a statement.

Cost management

“Telkom’s broadband-led strategy and the decision to invest in infrastructure ahead of demand enabled us to meet the surge in demand for broadband services,” he said. “These results also reflect the success of our financial strategic objectives, which include building financial resilience through sustainable cost management, cash preservation and disciplined capital allocation as we weather the impact of Covid-19 in our businesses.”

On its mobile performance specifically, Telkom said:

• The consumer business continued to be the driver of growth, where the mobile business sustained its growth trajectory with year-to-date mobile service revenue growing to R12.6-billion (R8.9-billion previously). This was supported by 25.9% growth in active subscribers to 14.9 million and a 23.9% increase in blended average revenue per user (Arpu) to R108.
• The post-paid market remained challenging in terms of new connections due to consumers being under pressure. However, post-paid year-to-date Arpu rose by 15.6% to R212.
• The prepaid market remained the driver of new connections, with prepaid customers growing by 30.8% to 12.3 million.
• Year-to-date mobile data revenue grew by 46.2% to R9.1-billion, driven by strong growth in mobile traffic of 64.4% and 27% growth in mobile broadband customers to more than 10 million.

Meanwhile, BCX’s performance remains under pressure with the overall market environment “challenging”, albeit with some economic recovery with year-to-date revenue down 9% to R11.9-billion. “The year-to-date decline in revenue is lower than the revenue decline reported in the first half of the year as we saw a slight recovery in the South African economy in the third quarter,” Telkom said.

Openserve, Telkom’s wholesale division, remains under pressure, with year-to-date revenue down 12% to R10.2-billion. “While we saw an increased need for data in the period, fixed voice usage continued to decline…”

Investment in the network allowed Openserve to carry increased traffic of 28% across its fixed-line network. “We saw an increase in demand for fixed connectivity resulting in an improved fibre-to-the-home connectivity to 56.7%, compared to 46.6% in the prior period.” — © 2021 NewsCentral Media