Telkom reports mobile, FTTH gains in Q3 results

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 19 Feb 2024
Telkom Group CEO Serame Taukobong.
Telkom Group CEO Serame Taukobong.

Telkom has posted strong results in the third quarter of 2024, spurred by its mobile and fibre businesses.

The JSE-listed telecommunications company today published a trading update for the quarter ended 31 December 2023.

During the quarter, Telkom’s group revenue was up 2% to R11.3 billion, with group earnings before interest, taxes, depreciation and amortisation (EBITDA) stable at R2.47 billion.

Group CEO Serame Taukobong says: “Telkom made good progress in the third quarter of the 2024 financial year, as it positions itself as the leading infrastructure company at the heart of South Africa’s digital future.

“Group performance for the quarter was pleasing against a strong comparative quarter, and Telkom managed to grow the top line, as compelling value propositions drove next-generation (NGN) revenue growth and operating earnings, thereby affirming our data-led strategy.”

According to Taukobong, the firm’s cost-reduction initiatives also contributed to improved operating EBITDA, as they partially offset inflationary increases, increased bad debt provisions and the added cost of load-shedding.

He notes Telkom Consumer and Openserve made progress and advanced operating earnings by 20.6% and 7%, respectively.

Weathering the storm

Overall group EBITDA was stable, despite the impact of continuing inflationary pressures on retail consumers and enterprises against a backdrop of muted economic growth in South Africa, he adds.

“Telkom remains committed to meet its medium-term guidance for the 2024 financial year, with a continued focus on cash generation and stringent capital allocation, with expected capital expenditure for the year better than indicated guidance.”

The telco points out that with NGN driving revenue growth, cost reduction initiatives partially offset inflationary pressures, as group revenue increased by 2% to R11.3 billion, driven by data-connectivity propositions from mobile and fixed networks.

It explains that higher recharges by prepaid mobile subscribers, and ongoing rollout of fibre network to homes and enterprises by Openserve drove revenue growth, supported by Swiftnet’s commercialisation of the masts and towers portfolio.

Enterprise demand for hardware and software remained healthy and grew in double digits at BCX, but overall revenues were impacted by the continued decline in traditional voice and data revenues, as customers migrate to NGN products, the company says.

“The continued uptake of our NGN products by retail and enterprise customers grew both active mobile and fixed subscribers,” Taukobong says.

“This, along with double-digit increases in data consumption, bode well for the group NGN revenue, which grew by 5.1%, offsetting traditional revenue declines. NGN revenues advanced by R440 million, while traditional revenues retracted R219 million, leading to group revenue growth of R221 million for the quarter.”

The results show mobile subscribers grew by 6.4% to 19.7 million, while mobile data traffic increased by 19.7% to 370 petabytes.

“Also noteworthy is the advancement of mobile broadband subscribers by 10.9% to 12.7 million, indicating growing smartphone users, essential in driving strong data consumption trends. Mobile data revenue grew by 11.5% as a result, supported by higher prepaid recharges, along with price increases,” it says.

According to Telkom, fibre-to-the-home (FTTH) connections increased by 20.8%, to 567 350 homes, with fixed data traffic up 24.4% to 612 petabytes.

Openserve’s NGN data revenue increased by 6.2% across all segments (FTTH, enterprise and carrier).

Says Taukobong: “We have worked relentlessly at mitigating the risk and impact of load-shedding on our operations, and capital expenditure investments made in alternative energy sources (including solar power and lithium-ion batteries) to improve our mobile and fibre networks’ resilience yielded results.

“Diesel consumption and related costs at Openserve have decreased and network availability for our mobile network availability improved to 94% from 89%.”

Telkom Consumer recorded a 2.5% expansion in revenue, reaching R6.8 billion. Taukobong explains this upswing is predominantly ascribed to the performance of the mobile business and strategic expansion of fibre services.

Notably, he adds, the fibre subscriber base saw an increase of 12.2% year-on-year.

Customers want more

Mobile revenue achieved a 4.8% increase to R6 billion. “This increase stems primarily from our commitment to innovative and compelling value propositions, thereby effectively stimulating data consumption. The significant contributor was mobile service revenue, which experienced a 7.1% growth to R5 billion.

“Notably, consumers exhibited an inclination toward seeking value through our exclusive prepaid pricing platform, Mo’Nice, which contributed 43.7% of recharge revenue.”

He states the mobile expansion emanated predominantly from the augmentation of the firm’s customer base, registering an upswing of 6.4% to 19.7 million, characterised by a blended average revenue per user (ARPU) of R86 (Q3 FY2023: R87).

The postpaid customer base was relatively flat at 2.9 million, recording an ARPU of R182 (Q3 FY2023: R204), having held steady around this mark for the last three quarters.

The prepaid base grew by 7.5%, reaching 16.8 million at an ARPU of R66 (Q3 FY2023: R64). Mobile EBITDA demonstrated 3.5% growth and reached R1.2 billion.

“This increase can be seen despite the heightened provision for bad debts, reflecting the ongoing financial challenges faced by consumers, and the adverse impact on profitability due to escalating load-shedding costs (R115 million),” Taukobong says.