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Openserve presses on with growth trajectory

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

Telkom’s fibre company Openserve continued to be a shining star in the group’s stable during the first quarter of fiscal year 2023.

The telephony group today updated shareholders on its performance in the quarter ended June, saying Openserve grew its homes passed base by 45.3% year-on-year to more than 890 000 and increased the number of homes connected with fibre by 35.2% year-on-year – a connectivity rate of 46.6%.

“Openserve continued to see growth in fibre revenue with a year-on-year growth of 6.5%, mainly driven by its broadband and carrier services contributing to its leadership in providing open access connectivity across South Africa,” says Telkom CEO Serame Taukobong.

“Openserve expects this trend to continue, underpinned by the ongoing demand for data consumption, which is reflected through the 18.9% growth in fixed data traffic to 452 petabytes.”

According to Taukobong, with a focus on smart deployment of its infrastructure, Openserve saw a sustained increase in its overall broadband base over the last three quarters.

“With fibre connectivity offsetting the copper access decline, Openserve's broadband services grew to over 612 000. This growth across its data portfolio contributed to Openserve's Q1 revenue of R3 217 million, while a 24% decline in fixed voice revenue across the enterprise and small to medium business resulted in an overall year-on-year revenue decline of 3.9%.”

In the period under review, other highlights for the Telkom Group include growth in active subscriber base, while active mobile subscribers went up 7.8% year-on-year to 17.3 million, with blended average revenue per user (ARPU) of R88.53.

Postpaid subscribers grew 8% year-on-year to 2.8 million at an ARPU of R208.50, while prepaid subscribers grew 7.7% year-on-year to 14.5 million at an ARPU of R64.77.

Mobile data traffic hiked 12.4% to 263 petabytes, supported by a 2% growth in broadband subscribers to 10.7 million, using on average 9.1GB per month and at a 13.5% increase in consumption for the year.

As to financial metrics, Telkom Group revenue dropped 3.2% to R10 281 million. EBITDA was also down 15.2% to R2 334 million, with EBITDA margin contraction of 3.2 ppts to 22.7% impacted by topline performance and an annual salary increase of 6%.

In the quarter, mobile service revenue declined 3.6% year-on-year to R4 281 million, with Telkom saying this is despite a 7.8% year-on-year growth in active subscribers to 17.3 million at a blended ARPU of R88.53.

Taukobong says Telkom’s trading update for the first quarter of the year demonstrates a challenging performance due to accelerated legacy migration, intense competitive landscape and consumers being under significant pressure due to rising fuel prices, interest rates and the high unemployment rate.

“As Telkom mobile value propositions remain attractive in the market to cater for affordability for our customers, its effective price per megabyte reduced by 14.8% year-on-year. The increase in the traffic growth, however, was not sufficient to offset the decline in effective pricing.”

Subsidiary impact

Turning to other Telkom subsidiaries, the company’s tower firm, Swiftnet, continues to commercialise the masts and tower portfolio, Taukobong notes.

“Swiftnet remains on course in commercialising its productive portfolio, which was up 2.7% to 3 935 towers. This included 17 towers and 2 IBS sites that were constructed during the first quarter of the year. Swiftnet achieved revenue of R322 million during the first quarter, marginally down from R325 million reported in the comparative prior period.”

However, he says, Swiftnet revenue was negatively impacted by terminations by one of Telkom’s external mobile network operator customers, as well as Openserve's decommissioning of legacy-based technologies.

On the positive, Taukobong says: “Lease escalations, new tenancies and equipment upgrades on sites where our tenants already had tenancy, as they continue to modify their networks, positively impacted revenue.

“We continue our proactive site acquisition and permitting initiatives. We have a pipeline of permitting of over 2 000 sites, which includes 393 building plan approvals ready to be executed when triggered by anchor tenancy, significantly reducing the time between demand confirmation and revenue realisation. We are also in an exploration phase in terms of power-as-a-service and security value-add offerings to our customers.”

On BCX, he says, the IT business delivered a good performance for the second quarter in succession.

“The IT business benefitted from the easing of global supply chain constraints, together with an increase in deal pipeline and win ratio, resulting in revenue growth of 2.6% to R1 760 million.”

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13 Aug
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