Telkom mobile surpasses 15 million subscribers as it targets home fibre progress

Telecoms operator Telkom on Monday (24 May) published its financial results for the year ended March 2021, showing a recovery in full-year headline earnings, spearheaded by its mobile division.

Group revenue grew marginally by 0.4% to R43.22 billion in a challenging operating environment. The group’s mobile business was the main contributor to revenue growth with service revenue growing by 34.5%.

Migration to work-from-home impacted the Enterprise fixed business as fixed usage diverted to mobile connectivity, leading to a 25.1% decline in fixed voice revenue, it said.

Furthermore, due to enterprises remaining under severe financial pressure as a result of the Covid-19 national lockdown, enterprise customers reduced or deferred their spend on IT, resulting in a 12.7% decline in IT revenue, Telkom said.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was up 11.7% to R12 billion with EBITDA margin at 27.7%.

Basic earnings per share and headline earnings per share were up 89.6% and 53.4% respectively, while capex was up 8.9% to R8.4 billion with capex to revenue ratio of 19.5%.

Telkom Group chief executive officer Sipho Maseko said that the group’s commitment to enabling connectivity meant it was perfectly placed to support the digital transformation and play a key role now and in future in ensuring that the digital world remains open, even when the physical world remained in shutdown for a considerable period.

“Our mobile business continued its growth trajectory as we surpassed 15 million subscribers during the year, carrying even more data traffic in 4G and 4,5G, as well as commencing our 5G rollout.” said Maseko.

“Allocating capital to a data-led and fibre-enabled mobile networks – a growth area of our business – successfully prepared us for the significant increase in data demand and mobile broadband services as more people worked, did business and studied from home.”

Mobile broadband traffic increased 53.2%, resulting in mobile data revenue growing by 41% and underpinning the 34.5% increase in mobile service revenue to R16.94 billion.

Telkom’s Mobile customer base increased by 27.8% to 15.3 million customers. The overall blended ARPU increased by 15.1% to R104, spurred by an atypical Covid-19 surge. The pre-paid customer base continued its strong growth, expanding by 35.1% to 12.7 million and pre-paid ARPU increased by 17.5% to R77.

The challenging economy had an impact on the overall post-paid base, but it remained relatively stable, growing by 0.7% to 2.6 million with an ARPU increase of 12.2% to R211, pointing to a distressed post-paid segment, Telkom said.

The group reported 41% growth in mobile data revenue to R12.211 billion, supported by 25.6% growth in mobile broadband subscribers to over 10 million.

Telkom said it increased its mobile footprint, with site roll out up 9.7% to 6,430. Capacity upgrades, underpinned by the deployment of additional carriers and temporary spectrum, as well as ongoing spectrum refarming, resulted in the upgrade of 2,096 sites with temporary spectrum, 1,971 sites with additional carriers, 1,309 refarmed sites and 804 sites where LTE capability was improved.

Telkom’s BCX unit suffered a decline in revenue as the national lockdown and the work-from-home response impacted fixed-voice revenues from enterprise customers. Information technology (IT) revenue also came under pressure as corporates deferred capital expenditure (capex) and delayed projects given the increased levels of uncertainty.

As the country locked down, BCX successfully focused on optimising its cost base with a clear focus on cash preservation, resulting in EBITDA increasing by 6.6%, Telkom said.

Gyro continued its growth by commercialising existing towers and executing on the new build pipeline which saw revenue increase by 6.6% to R1.24 billion supported by an 8% increase in the growth of leases.

Openserve saw a 2.9% rise in the fibre-to-the-home (FTTH) connectivity rate to 51.1%, and homes passed increased by 20.7% to 549,957.

Capital investment of R8.45 billion with capex-to-revenue of 19.5% was impacted by the national lockdown in the first half of FY2021 but recovered in the second half. The focus on key growth areas saw 53.3% of capex investments geared towards mobile, underpinning the growth in mobile service revenue of 34.5%, Telkom said.

In addition, 29.3% of investments were geared towards services such as fibre, core network and service-on-demand.

“Our capital investment over the past five years has enabled us to successfully evolve the business. With next-generation revenue streams contributing approximately 70% of Group revenue and driving growth, we have de-risked the business,” said Maseko.

“We reviewed our capital allocation framework,” Maseko said, “and are now in a position to reconsider the suspension of the dividend policy”. A new dividend policy will be communicated on release of the FY 2022 interim results in November 2021.