Telkom delivers strong growth on mobile customer surge

Telkom on Monday reported a 5.3% increase in operating revenue for the year ended March 2019, driven by strong growth in its mobile business.

Mobile service revenue increased by 58.3%, “underpinned by our broadband-led proposition,” it said in a statement on Monday.

It said that BCX recorded growth in information technology (IT) revenue from external enterprise customers despite the  weak economic environment and Gyro performed very well.

“The change in technology continues to put our fixed business under pressure with fixed voice revenue negatively impacting the overall performance of BCX and Openserve,” it said.

Key salient features:

  • Group operating revenue up 5.3% to R41.8 billion
  • EBITDA up 8.5% to R11.3 billion
  • EBITDA margin of 27.1%
  • Capex of R7.7 billion with capex to revenue ratio of 18.4%
  • Final ordinary dividend of 249 cents taking the annual dividend to 362 cents, an increase of  2.0% year on year
  • Headline earnings per share was up 22.6% to 722.4 cents per share.

Group chief executive officer, Sipho Maseko, said: “The significant growth in mobile service revenue was supported by an 85.9% growth in active subscribers to 9.7 million, as our affordable broadband-led proposition continues to resonate with customers. Despite adding 4.5 million subscribers in the year, our blended average revenue per user (ARPU) was stable at R100.”

Pre-paid  subscribers more than doubled compared to the prior year, increasing by 109.3% to 7.8 million.

“Our pre-paid proposition continues to attract good quality subscribers demonstrated  by a significant increase in pre-paid ARPU of 19.8% to R71. Post-paid subscribers increased by 26.8%, with net additions of approximately 396,000 to reach 1.9 million, with an ARPU of R186,” Maseko said.

The chief executive said that the strategy to separate its property and mast and tower portfolio to increase management focus and unlock value  for the group is bearing fruit. “Gyro’s external revenue grew by 24.2% and the mast and tower tenants grew  by 10.5% compared to FY2018.”

BCX’s IT revenue from external customers grew 6.2%. Maseko said. “This was achieved despite the weak economic environment  where South Africa experienced a technical recession in the first half of the year, and consumers were under  pressure from increases in tax and fuel and a weaker currency.

“This is an encouraging result given that BCX  touches all sectors of the economy. I am particularly pleased that BCX has now stabilised as an organisation,  mainly attributable to a new leadership team, a change in the operating model and an enhanced strategy focusing  on customer retention,” he said.

Telkom reported a decline in its fixed line business revenue of 7.9% as customers migrate to new technologies.

Fixed voice  and interconnection revenue declined by 14.3%, which negatively impacted the overall performance of Openserve  and BCX. Despite this impact, overall revenue decline was contained at 3.3% for Openserve and 3.4%  for BCX.

“Our capital investment of R7.7 billion continues to underpin our growth, with a capital expenditure (capex) to revenue ratio of 18.4 percent. Our ongoing investment enabled Telkom to grow new revenue in evolving technology, offsetting the traditional revenue shrinkage,” said Maseko.

“Over the past six years, the contribution of our new revenue streams has grown significantly, the mobile revenue contribution increased from 3.2% to 25.7%, and IT revenue grew from 0.9% to 16.2%. “We continue to invest in the fibre ecosystem which sustains our fixed data revenue,” he said.

He said that the company is prudent in homes passed by fibre strategy and focus on homes connected. “We increased the home connectivity rate to 38.4% (FY2018: 30.7%),” he said.

Telkom’s capital investment of R7.7 billion – with a capital expenditure to revenue ratio of 18.4% – continues to underpin business growth, Maseko said.

“The ongoing investment enabled Telkom to grow new revenue in evolving technology, offsetting the traditional revenue shrinkage. Telkom will continue to proactively invest in technologies and the network so that the group remains at the forefront of change,” the chief executive said.

Read: Jabu Mabuza resigns as chairman of the Telkom Board

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Telkom delivers strong growth on mobile customer surge