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Mobile, broadband services cushion Telkom in full-year results

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Serame Taukobong, Telkom Group CEO.
Serame Taukobong, Telkom Group CEO.

Telkom recorded a buoyant performance in its financial year 2022, characterised by the growth of the mobile base and broadband segment.

The telco reported its year-end results today, saying it shrugged off the weak macro environment and increasingly competitive market to record sturdy performance.

In the year ended March, Telkom’s active mobile subscribers went up 10.5% to 16.9 million, mobile broadband customers were 10.7 million, homes passed with fibre increased by 52.7%, while the fibre-to-the-home connectivity rate also surged.

However, on key financial metrics, revenue dropped by 1.1% to R42.76 billion, while profit increased by 8.4% to R2.63 billion.

The telephony group says its mobile business continued to drive growth in the consumer segment, growing the prepaid customer base by 12% to 14.3 million, with average revenue per user (ARPU) normalising to pre-COVID-19 levels.

In the postpaid market, the postpaid base increased by 3.4% to 2.7 million, and high levels of ARPUs were maintained at R212.

Resultantly, Telkom recorded mobile revenue growth of 6.3%, which group CEO Serame Taukobong says was achieved against “the backdrop of an intensely competitive landscape and challenging economic environment”.

In the year, Telkom-owned fibre network operator Openserve was another shining star in the stable, as it increased fixed data revenue by 5.5%, largely driven by the growth in carrier links.

Over the period, Telkom says an increase of 16.6% in fixed data consumption was seen across the network, with an increase of 52.7% in the number of homes passed at a connectivity rate of 46.3%.

“This is in line with the strategy to accelerate the fibre-to-the-home footprint, while simultaneously focusing on connecting homes. In the second half of the year, overall fixed broadband customers increased for the first time in several years despite the decline in ADSL customers,” says Taukobong.

“Openserve’s stabilisation path continues and is well under way in turning around several years of revenue declines. The Openserve business evolved as customers migrated from legacy to next-generation over the years. Today, more than half of its revenue is derived from the new business. However, a pricing gap remains between the new business and the legacy business.”

Turning to BCX, Taukobong says the unit remains under pressure due to the lingering impact of the lockdown and the global supply chain constraints and shortages of semiconductor chips.

He comments on BCX’s performance: “The second half of the year saw good growth resulting from investments in new capabilities, progress made with strategic programmes and renewed activity in the market. Revenue declined by 2.6% mainly impacted by the IT segment, which faced supply chain pressure, while the Converged Communications business stabilisation is gaining momentum. This fares well compared to a 6.1% revenue decline reported in the first half of the year.

“The improvements in performance seen in the last quarter across the business signal a more positive outlook for the next financial year.”

Turning to Telkom’s key financial metrics for the year, Taukobong says, despite a 1.1% decrease in revenue across the group, Telkom managed to deliver a stable EBITDA of R11.9 billion, expanding the margin by 0.2ppts to 27.9%.

“This was achieved through various initiatives that introduced efficiency to operations while improving the customer experience.”

In the year, the group also grew its earnings, with underlying headline earnings per share and basic earnings per share increasing by 2.5% and 1.4%, respectively.

Looking ahead, Taukobong notes 2022 was a reset year following changes in the global market, and his board remains committed to the value unlock strategy which is premised on Telkom's market capitalisation not representing its intrinsic value.

He explains: “The board’s key focus is to drive maximum shareholder value. The delay of the separate listing of Swiftnet due to volatile capital markets was to protect shareholder value.

“Our strategic approach going forward is to affirm the valuation of these businesses and their contribution to the valuation of Telkom, while ensuring long-term sustainable growth for the group. To this end, the board continues to explore all strategic options that it believes supports its value unlock strategy, which seeks to maximise shareholder value.”

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