Telkom mobile customers grow by 76% - but its profit takes a hit

Telkom’s [JSE: TKG] profit took a hit in the six months to end-September as it invested billions in mobile and fibre services.

Its headline earnings fall 36%, while its net debt increased by almost R2 bn to R11.8bn as it invested R4.2bn into mobile and fibre services. It increased its number of mobile base stations by almost 25% to 5 476. 

It also invested into preparations to upgrade customers to LTE and fibre. Telkom said it now has the highest connectivity rate for fibre to the home in the market.

Telkom increased its revenue by 4.7% to R21.5 billion, with its mobile service revenue up 56.6% to R5 602bn.

The number of mobile subscribers rose by 76% to 11.5m customers.

Telkom increased its dealer network to accommodate growth. "However, we unfortunately experienced unsavoury dealer behaviour that drove the pre-paid acquisition of the low-end value voice-only subscribers." Telkom said its "rebalanced" the base, after implementing punitive action against the selected dealers, but this has resulted in the 13.3% decline in pre-paid average revenue per user (ARPU).

ARPU from contract clients declined by 7.0%, primarily due to the repositioning of entry-level deal.

Telkom's share price lost more than a third since June.