Telkom SA revenue boosted by mobile, fiber growth

South African operator Telkom saw group revenue for the six months ended September 30, 2024, tick up on the back of growth in both its mobile and fiber segments.

Telkom on Monday said that group revenue had grown 1.9% to almost R21.4 billion (US$1.18 billion), with mobile service revenue increasing by 10% and fiber data service revenue increasing by 15.5%.

South Africa's third-biggest mobile operator also added more subscribers during the period.

Mobile subscribers grew to almost 22.8 million, a 24.6% increase year-on-year, and mobile data subscriber numbers rose by 19.6%, to 14.6 million. Prepaid subscribers also grew by 19% year-on-year.

Mobile data traffic increased by 25.7% while data revenues were up by 12.7%.

"The mobile network is ready for the 2G/3G migration, and that is where the Telkom mobile team is driving service revenue growth ahead of market trends, and has continued so in almost four quarters in a row," Telkom Group CEO Serame Taukobong said during the group's results announcement on Monday.

He was referencing an industry-wide drive to move 2G and 3G subscribers onto 4G services and also the South African government's plans to sunset 2G and 3G networks by 2027.

"The driver in mobile is really deep segmented data propositions. So, it's a mix across from lower-end packages all the way to high-end. It's not usually your big bundles, but it's your smaller denomination bundles, which is the key driver, especially in your prepaid segment," the CEO added.

Related:Telkom SA now has over 20M mobile subs

"As your subscribers are moving from 2G entering into the 4G segment, that's where you actually are picking up most of the demand, and that's where the pricing, particularly on prepaid, is at the sweet spot," he explained about the mobile revenue growth strategy.

(Source: Telkom interim results presentation for the six months ended September 30, 2024)

Telkom said that the half-year improvement reflects the company's enhanced operational efficiency and successful monetization of its digital infrastructure asset base.

"Our continued investment in our extensive fiber network and mobile infrastructure is now delivering the competitive advantage we anticipated, propelling our data-led strategy to ensure future-readiness," added Taukobong.

On the fiber side, homes passed by Openserve's fiber infrastructure grew by 11.4% and homes connected by fiber increased 18.1%.

Telkom SA said it maintained a 49.7% home connection rate and Openserve's fixed broadband traffic increased by 28.5%.

However Openserve's overall revenue declined by 1.6% year-on-year, to R6.16 billion ($340 million), as it continues to experience a decline in traditional segments like fixed voice, interconnection revenue, as well as legacy data revenue.

Related:Telkom SA reports flat revenue

Financial performance improves

Group adjusted earnings before interest, tax, depreciation and amortization (EBITDA) grew 18.3% to R5.6 billion ($309 million) but excluded a restructuring cost of R160 million ($8.8 million) and the Telkom Retirement Fund "derecognition loss" of R618 million ($34 million).

The group said that its balance sheet had strengthened, and free cash flow remained positive at R768 million ($42.4 million) benefiting from strong operating cash generation, compared to negative R478 million ($26.4 million) in the previous period.

However, no interim dividend was declared.

"Our improved cash generation and strengthened balance sheet position us well to continue investing for future growth while maintaining financial discipline," said Group CFO Nonkululeko Dlamini.

"We continued with smart capital spend of R2.5 billion [$138 million] invested in infrastructure, which is at the heart of our strategy. The capital intensity ratio of 11.9% remains efficient and in line with our forecast of 12-15%," she added.

Telkom's ICT solutions provider, BCX, saw IT services revenue tick up by 1.9%, an improvement on declines shown during the previous financial year.

Related:SA Tribunal gives Telkom go-ahead for Swiftnet sale

Disposal of non-core assets

Telkom is also continuing its strategy to dispose of non-core assets and focus on high-growth areas.

Subsidiary Gyro received proceeds of R204 million ($11.3 million) from the disposal of non-core properties.

Telkom is still awaiting final regulatory approvals for the sale of its masts and towers subsidiary Swiftnet.

South Africa's Competition Tribunal approved the disposal of Swiftnet in September 2024, but Telkom is still waiting for regulatory approval for the license transfer.

"We do remain focused on our ambition of being the enabler of not just digitizing Telkom, but being the key catalyst of digitizing South Africa through leveraging our infraco [infrastructure company] strengths in fiber and in mobile," Taukobong said.

He said that for the remainder of the financial year, the operator will try to maintain the momentum it saw in the first half to ensure that it continues to deliver improved results going forward.