Change in tech continues to put Telkom fixed business under pressure | Fin24
 
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Change in tech continues to put Telkom fixed business under pressure

May 27 2019 21:02

The Telkom Group announced its group provisional results for the year ended March 31, 2019 on Monday.
 
Group operating revenue increased by 5.3% to R41.8bn, driven by its mobile business. Mobile service revenue increased by 58.3%, underpinned by its broadband-led proposition, it said in a note to shareholders.

"The change in technology continues to put our fixed business under pressure," commented CEO Sipho Maseko. "Overall, I am pleased that the growth in the new revenue streams drives overall growth for the group attesting to the success of our
investment strategy."

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 8.5% to R11.3bn and headline earnings per share increased by 22.6% to 722.4 cents. A final ordinary dividend of 249 cents per share declared, takes the annual dividend to 362 cents, an increase of 2.0% year-on-year.  

Maseko said Telkom continues with its "relentless focus on cost reduction". Operating expenses declined by 1.4% due to a 12.5% reduction in permanent staff due to the group's "staff optimisation process".

This was, however, offset by the growth in maintenance costs to support the 28.7% increase in mobile sites by 1 142 sites in the year as it grows its mobile coverage and capacity.

"Having the right talent, in the right place, at the right time is critical to our success, and delivering on our vision. The group employs, supports and develops people to ensure we have the right capabilities, commitment and enthusiasm to achieve our strategic objectives," said Maseko.

"Telkom's focus areas remain transformation and talent development."

The racial breakdown of permanent employees during the financial year comprised of 64% black South Africans, 33% white South Africans and 3% non-South Africans. According to Telkom, it remains a challenge to realise gender equality and women representation "which aligns to the challenges of the broader ICT sector". Within the group, women represent 31% of employees.

Mobile growth

According to Maseko the significant growth in mobile service revenue was supported by an 85.9% growth in active subscribers to 9.7 million, as Telkom's "affordable broadband-led proposition continues to resonate with customers".

Telkom added 4.5 million subscribers during the financial year. Pre-paid subscribers more than doubled compared to the prior year, increasing by 109.3% to 7.8 million. Post-paid subscribers increased by 26.8%, with net additions of approximately 396 000 to reach 1.9 million.

"Our strategy to separate our property and mast and tower portfolio to increase management focus and unlock value for the group is bearing fruit. We remain focused on operational efficiencies to preserve margins while our revenues evolve, and we manage the impact of inflation on our expenses," said Maseko.

"Our capital investment of R7.7bn continues to underpin our growth, with a capital expenditure (capex) to revenue ratio of 18.4%. Our ongoing investment enabled Telkom to grow new revenue in evolving technology, offsetting the traditional revenue shrinkage."

Over the past six years, the contribution of its 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. We are prudent in our homes passed by fibre strategy and focus on homes connected. We increased the home connectivity rate to 38.4%," said Maseko.

telkom  |  earnings reports
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