Telkom SA now has over 20M mobile subs

Telecoms operator Telkom South Africa grew its mobile subscriber base by 11.9% to 20.4 million over the past year.

That's according to the group's financial results for the year ended March 31, 2024, which show that mobile broadband subscribers also grew 9.5%, to 12.7 million, representing 62.3% of the total mobile base.

Reaching the 20 million mobile user mark puts Telkom SA firmly in third place in the South African market, behind market leader Vodacom, which had 59.9 million mobile subscribers at the end of March 2024, and MTN, which had almost 37.7 million users, according to statistics from market research company Omdia, a sister company of Connecting Africa.

Telkom was well ahead of Cell C's less than 9.2 million subscribers and Rain's 637,000 mobile users in South Africa at the end of March.

Group revenue for the financial year grew 1.6% to R43.2 billion (US$2.38 billion) while mobile service revenue was up 6.8% to R19 billion ($1 billion). Headline earnings per share (HEPS) – a key profit indicator in South Africa – increased 201.3% to R3.76 (US$0.21) per share.

The group's earnings were an improvement on last year's results, with adjusted profit for the year increasing by more than 100% to R1.9 billion ($105 million), boosted by once-off restructuring costs and lower depreciation.

Telkom said its cost-optimization efforts helped achieve a 5.2% growth in normalized earnings before interest, taxes, depreciation and amortization (EBITDA) to R10 billion ($552 million). When including non-recurring restructuring costs from the previous year, reported EBITDA increased by 18.4%.

"Group performance improved against a challenging economic backdrop in South Africa," said Telkom Group CEO Serame Taukobong.

"Our data-led strategy delivered ahead of industry trends. We invested R6.1 billion [$337 million] towards network resilience, expanding our mobile network, modernizing our fixed network infrastructure and fortifying our skills and capabilities for ICT-managed services," he added.

This investment included spectrum, which Telkom said it has deployed to further improve offerings to retail, enterprise and wholesale customers.

Progress was made on the Group's "value unlock strategy" through the proposed disposal of its masts and towers subsidiary, Swiftnet, for R6.75 billion ($373 million), which has been approved by shareholders.

"The sale of the masts and towers business will strengthen the Group balance sheet and release cash flow for investment," said Taukobong. "This, together with our healthy operational performance, leaves us well positioned to continue our ambitious growth plans for our mobile and fixed-line connectivity businesses."

The group did not declare a dividend for shareholders but said it expects to be in a position to pay dividends at the end of the 2025 financial year.

Mobile momentum

Telkom's mobile subscriber base has continued to grow despite operating in what it calls a "highly competitive market" and it has added 5 million users since 2021.

The prepaid base expanded by 14.3% in the last year to reach 17.5 million subscribers while the postpaid base remained relatively stable at 2.9 million subscribers.

Telkom said the growth was fueled by the acquisition of higher-quality connections and improved recharging behavior as well as average revenue per user (ARPU) within the existing customer base.

The telco invested almost R2.6 billion ($143.5 million) in mobile capex, including R972 million ($53.7 million) for spectrum.

"This enabled us to expand our network coverage by 2.5%, grow our presence to 7,738 sites, and maintain network resilience by replacing over 5,688 lithium-ion backup batteries and repairing more than 1,606 sites," the operator said.

Telkom SA added over 2 million more mobile subscribers over the past year, topping 20.4 million mobile subscribers by the end of March 2024. (Source: Image by freepik)

Currently, 51% of Telkom's data traffic is routed through its 4.5G network (primarily serving fixed wireless access) and 46% through its 4G network (predominantly catering to mobile data services). It has also deployed 465 active 5G sites since launching its 5G services in 2022.

Telkom's consumer segment increased external revenue by 2.2% to R26.1 billion ($1.44 billion), with external revenue from mobile operations up 4.5% to R22.6 billion ($1.25 billion), driven by 6.8% growth in mobile service revenue.

Fiber focus

Telkom's wholesale infrastructure connectivity provider, Openserve, saw revenue from next-generation, data-led products and services grow 7.4%, to 76.4% of its total revenue.

Openserve's revenue growth was driven by a 16.1% uptick in next-generation broadband connectivity (fiber-to-the-home), while the enterprise and carrier segments grew by 4.8% and 2.5%, respectively.

Openserve's fiber connectivity rate advanced to 48.5% and it has now passed more than 1.2 million homes with fiber. Fiber connectivity now constitutes more than 93% of Openserve's external wholesale revenue.

Telkom's ICT solutions provider, BCX, remained under pressure with reported revenue dropping 2.3% to R12.9 billion ($712 million) after an accounting revision. It did see IT revenue increase due to a strong performance from the hardware and software business and reduced some operating costs.

However, this was not sufficient to offset the combined effects of revenue mix at lower margins, the decline in higher-margin legacy revenue, and higher expected credit losses on trade receivables, Telkom said.

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Subsidiary Gyro shifted its focus to managing the group's property portfolio for core operational purposes and the sale of properties no longer required by the company generated R92 million ($5 million).

Taukobong said the group has built a good base from which to grow as a focused "InfraCo," using its mobile and fixed networks and ICT capabilities.

"This will entail efficiently investing in mobile and fiber network businesses while expanding ICT capabilities anchored by data centers," he added.

*Top image is of Telkom Group CEO, Serame Taukobong. (Source: Telkom Group)

— Paula Gilbert, Editor, Connecting Africa