Telkom earnings improve

Telkom on Monday (18 November) reported a marginal increase (0.3%) in operating revenue for the six months ended September 2013, to R16.2 billion, driven by growth in mobile data and IT Business services revenue.

The group pointed to headline earnings per share of 224.2 cents from 101.1 cents in the prior reporting period.

This was primarily due to higher fair value gains as a result of the weakening rand and lower payments to mobile operators relating to the decrease in mobile termination rates.

The number also excludes the curtailment gain of R2.173 billion recognised on the post-retirement medical aid liability and the provision for the Competition Commission fine of R389 million in the prior period.

Profit after tax increased 41.1% to R773 million, but EBITDA decreased 0.4% to R3.9 billion.

Capital expenditure increased 49.5% to R3.17 billion from R2.1 billion.

Telkom reduced its company employees by 9%, to 19,316, from 21,217 before.

Telkom Mobile

Mobile revenue increased 55.4% to R926 million, while mobile data revenue rose 50.0% to R303 million.

Telkom said that active mobile subscribers increased 6.9% to 1.598 million with a blended ARPU of R58.81.

Total mobile subscribers increased by 17.4%, to 4.4 million.

Mobile sites integrated increased 28.3% to 2,238, with 871 LTE sites integrated.

“These results show that we are improving efficiencies and laying the foundation to stabilise Telkom’s business performance,” said Sipho Maseko, Group CEO at Telkom.

“We are actively cutting costs, the group continues to generate strong cash flows and we are investing in our access network infrastructure which will improve our competitiveness and revenues in the years ahead.”

Maseko highlighted the increase in data revenues – mobile data revenue increased by 50% while revenues from Telkom’s Business IT services were up by 110%.

“Telkom is working hard to capture the data opportunity in South Africa. Data revenue constituted 33.7% of group revenue and increased by 3.1% overall. Lower prices on data due to competitive offerings continue to negate the volume growth experienced in this area. While we are encouraged by the improvement in mobile data revenue, we continue to explore all avenues to de-risk the mobile business.”

Excluding the curtailment gain recognised on the post-retirement medical aid liability and the provision for the Competition Commission fine in the prior period, operating expenditure increased 2.4% to R12.5 billion.

“Through prudent cost management, we aim to stabilise the group’s financial performance going forward,” said Maseko. “While we have made progress in curbing operating expenditure to some extent, it will take time to transform group revenue into strong positive growth.”

Looking ahead, the CEO said Telkom was instilling a disciplined approach to capital allocation. It would invest in areas where it had leadership, and place a greater emphasis on productivity and returns. Infrastructure investment, in particular, would be returns-driven.

“There is a window of opportunity for Telkom to become the leader in data transmission, but we must act with speed and determination to commercialise our competitive advantage. We will invest in the right technologies, drive execution capability and connectivity,” he said.

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Telkom earnings improve