Telkom claws its way back to profit

Telkom has seen its profits skyrocket despite the challenging economic background in South Africa.

In its financial results for the year ended 31 March 2024, the group said that its “data-led strategy” allowed it to grow mobile service revenue by 6.8% to R19 billion and surpass 20 million mobile subscribers.

Openserve’s fibre connectivity rate increased to 48.5% as it prioritised monetising its fixed network, surpassing 1.2 homes with fibre.

BCX has grown its IT service revenue, and Swiftnet’s tower rollout programme and tenant growth further contributed to revenue growth and margin expansion for the broader group.

The group also invested R6.1 billion towards network resilience, expanding its mobile network, modernising its fixed network infrastructure and improving skills and capability for ICT managed services.

Telkom is also making progress in unlocking shareholder value via the sale of Swiftnet for R6.75 billion, which shareholders approved on 24 May 2024.

“This approval indicates our shareholders’ support for management to explore further opportunities that enhance shareholder value.”

Until regulatory approval is given for the sale, Telkom will continue to operate Swiftnet.

Looking at the financials, total headline earnings per share (HEPS) and basic earnings per share (BEPS) increased by well over 100% to 376 and 385.5 cents, respectively.

“From a loss position in the prior year, profit for the year also increased by more than 100% to R1.9 billion, boosted by the non-recurrence of once-off restructuring costs and lower depreciation, while higher interest rates increased net finance costs compared to the prior year,” said the group.

Telkom is also looking to return cash to shareholders after sufficiently funding capex and strengthening its balance sheet. The first year-end dividend payment is targeted for FY2025.

“A revised dividend policy has been approved by the Board. The new policy will be based on available free cash flow while prioritising a strong balance sheet and future capex requirements,” said the group.

“The policy proposes a dividend payout range of 30% to 40% of free cash flow after taking into account capex investments. The dividend will be declared and paid on an annual basis, with a resulting dividend yield comparable with local telecommunications companies.”

Outlook

The group’s plan to operate as an infrastructure company (InfraCo) is to grow by pooling its assets and capabilities as OneTelkom.

“This will improve returns for the group on our existing and future digital infrastructure. We will invest capex in identified growth areas ahead of time to improve our future operating profit, cash flow and, ultimately, returns on the capital invested.”

“With the proposed disposal of Swiftnet, our future areas of growth have been brought into focus as we
enter our next phase of monetising Telkom’s existing and future digital infrastructure as an InfraCo.”

“This will entail efficiently investing in our mobile and fibre network businesses while expanding our ICT capabilities anchored by data centres (own and through partnerships) as a base from which to grow our IT managed services offering.

The group also said that the immediate rollout of 5G and equipment upgrades by MNOs due to migrating 2G and 3G customers to 4G and 5G technologies by the end of 2027 will drive fibre connectivity and rollouts to towers and 5G small cell sites.

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