Fibre, data consumption lift Telkom earnings

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 31 Jul 2023
Serame Taukobong, group CEO of Telkom.
Serame Taukobong, group CEO of Telkom.

Despite challenging trading conditions impacting Telkom’s group profitability, the telco posted double-digit growth in data consumption, with mobile data revenue growing almost 10% amid increased demand for connectivity.

The telephony group today reported its trading update for the quarter ended 30 June, revealing its data-led strategy paid off, as mobile data revenue grew 9.9%, driving mobile service revenue growth, while its fibre business advanced 10.6%.

On key financial metrics, group revenue was up 3.8% to R10.6 billion and group EBITDA declined by 4.2% to R2 235 million, impacted by legacy and fixed voice revenue declines caused by the ongoing migration to new generation network (NGN) technologies across its businesses, as anticipated.

The telephony group says its mobile business continued to drive growth in the consumer segment –growing subscribers by 25.1% to 18.5 million.Mobile broadband customers were up 8.9% to 11.7 million, comprising an increased63.2% of active mobile customers.

During the quarter, BCX’s revenue was up 2.9% driven by IT business growth, notes the report. Openserve’s fixed data new generation revenue growth was sustained at 10.6%, with fibre-to-the-home growing at a connectivity rate of 46.5%, and the number of homes connected up 24.2%.

Telkom group CEO Serame Taukobong comments: “Telkom has started the 2024 financial year with good momentum. Group performance was pleasing in the face of rolling power outages, muted economic growth, continuing inflationary pressures on consumers and an intensely competitive landscape.

“Our value-driven and data-led strategy paid off, as new generation network revenues grew. Our subscriber bases continued to grow and with increased demand for connectivity, we saw strong double-digit growth in data consumption. NGN revenue growth in our fibre business contributed to Openserve's leadership in providing open access connectivity across South Africa.”

In the quarter, demand for IT hardware and software at BCX was healthy, as the IT business increased by 17.5% to R2 billion. This is attributable to growth in the software and hardware business of 62.9%, resulting from fulfilling order backlogs, as the fulfilment of orders improved along with new orders, says the group.

Telkom Consumer recorded a 1.8% increase in revenue during the quarter, to R6.4 billion. The growth can largely be attributed to the mobile business and expansion of its fibre offerings, it says.

“Our legacy copper-based voice revenues, however, continued their downward trajectory, declining by 24.2%. This decline is a result of our deliberate effort to reduce the risk associated with legacy voice services, which now accounts for only 4.8% of gross revenue.”

Tower business Swiftnet's EBITDA increased by 1.7% to R234 million year-on-year (YOY), in line with marginal revenue growth.

“During the quarter, Swiftnet continued to commercialise its masts and towers portfolio, with four towers and one in-building solution site being constructed during the first quarter. Revenue increased by 1.2% to R326 million YOY, underpinned by escalations, new tenancies, customers' 5G rollouts and existing tenant installation upgrades.”

Telkom is continuing with its “value unlock strategy” – where it is looking for partners to support its requirements, either for scale or capability, or both – across its subsidiaries, says the telco.

Interest in the group’s assets gathered momentum over the last few years, as the struggling telco looked to sell off part of its assets amid a difficult operating environment.

According to Taukobong, Telkom conducted a market sounding exercise earlier this year to assess the depth of interest in a minority strategic equity stake in Openserve and has received credible expressions of interest from a range of local and international parties.

“Telkom is positioning itself as an infrastructure business (InfraCo) at its core. Once this transition has been concluded, Telkom will consider its further options to realise value, including in relation to the expressions of interest received for Openserve.”