Johannesburg - Sipho Maseko, Telkom’s chief executive, yesterday became the poster child for the telecoms industry as the country’s biggest landline provider reported a maiden profit for its mobile unit during the half year to September.
Telkom’s shares surged almost 7 percent on the JSE yesterday to trade at R63.48 a share - a reflection of the market’s vote of confidence following 43.2 percent growth in mobile broadband revenue to R1 billion for the period under review. The shares closed at R62.89.
The growth was supported by 2.3 million mobile broadband customers, which was 44.5 percent higher compared with the prior corresponding period, said Telkom, which is 40 percent owned by the government.
Maseko said 70.8 percent of Telkom customers data usage was at an average of 2.7 gigabytes a customer a month.
“Our mobile business has been able to establish itself as a meaningful player in the market. We intend to grow our scale in the mobile market through focusing on the post paid and data market where we are already making inroads,” Maseko said.
Telkom now appeared to be free from government interference to roll out their business strategy with highlights, including the introduction of an interim dividend of 131 cents a share as the board appeared confident by increasing its dividend payout ratio to 60 percent of headline earnings from 40 percent.
The company also reported a 20.6 percent surge in operating revenue to R20.2bn in the period under review.
Net operating revenue was up 3.3 percent, boosted by the consolidation of Business Connexion in the period, along with robust performance by the mobile business.
Earnings before interest, tax, depreciation and amortisation (Ebitda), grew 4.6 percent to R5.3bn with a margin of 26.1 percent, slightly ahead of margin guidance.
Expenses
Telkom attributed the growth mainly to the 14.3 percent cut in headcount to 12 184, and a reduction in company employee expenses of 14.6 percent.
It reported a 43.2 percent growth in mobile broadband revenue to R1bn supported by 2.3 million mobile broadband customers, which was 44.5 percent higher compared with the prior corresponding period.
Telkom’s growth comes as rival Vodacom on Monday said headline earnings in the six months to September was flat at 440c a share and revenue had risen by 5.4 percent to R10.7bn, while MTN battles the Nigerian fallout over unregistered SIM cards.
Ron Klipin, a portfolio manager at Cratos Wealth, said the company appeared to be in turnaround mode, with Maseko and his able management team starting to deliver on their envisaged strategy.
“This entails a major thrust into mobile growth, via a build up of critical mass enabling this entity to become profitable in a very competitive market,” Klipin said.
The recent subdued Vodacom results mirrored the tough economic environment, which was also impacting on Telkom’s recent acquisition of ICT operator Business Connexion, which would be an essential part of expanding Telkom’s operations.
Growth platform
“The roll-out of fibre is also an essential part of the new growth platform of the business as is the postpaid data markets. Mobile subscribers have increased from 1.57 million to 2.2 million. Together with acquisitions this has offset the decline in revenue from the traditional landline entities,” he said.
This has resulted in group revenue growth of 20.6 percent with Ebitda growth of 50 percent due to efficiencies and good cost management.
“Although Telkom still faces many challenges, it appears to be re-inventing itself into a business model more appropriate to a rapidly changing ICT environment,” he said.
Richard Hurst, the director of enterprise research at Africa Analysis, said the boost in Telkom’s share price was a reflection of investor confidence in the company’s future. He also said that Telkom’s results indicated that the company had put the right fundamentals in place to grow the business.
“A few years ago Telkom went through changes in management and that created a lot of uncertainty. Under Sipho’s leadership the company is doing what it said it would do. The board has given Sipho the tools necessary to get the job down,” Hurst said.
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