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Telkom first quarter revenue falls 3.2% in tough environment

Telkom says group revenue was down 3.2 percent to R10.28 billion. File photo

Telkom says group revenue was down 3.2 percent to R10.28 billion. File photo

Published Aug 3, 2022

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Telkom, which has started negotiations about its possible acquisition by MTN, said yesterday it had achieved stable growth in active subscribers in its first quarter ended June 30.

Its active mobile subscribers were up 7.8 percent to 17.3 million year on year, the group said in a trading statement.

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MTN announced last month that it wishes to acquire all of Telkom shares in return for shares or a combination of cash and shares in MTN. “Discussions are at an early stage and still in progress,” Telkom’s management said yesterday.

Its pre-paid subscribers grew 7.7 percent year on year to 14.5 million. Mobile data traffic increased solidly by 12.4 percent to 263 petabytes supported by a 2 percent growth in broadband subscribers to 10.7 million year on year.

Fibre growth trajectory was sustained in the period under review on a year-on-year basis. Total fixed traffic increased by 18.9 percent to 452 petabytes.

The number of homes passed with fibre grew 45.3 percent to more than 890 000. Number of homes connected with fibre grew by 35.2 percent to 414 847.

Nevertheless, group revenue was down 3.2 percent to R10.28bn.

Group earnings before interest, tax, depreciation and amortisation (Ebitda) fell 15.2 percent to R2.33bn with Ebitda margin contraction of 3.2 percentage points to 22.7 percent impacted by top-line performance, and an annual salary increase of 6 percent.

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The BCX IT business improved profitability after a challenging period, while the group also made “substantial progress” on its “value unlock” strategy.

Progress on value unlock/creation strategy included the legal separation of Openserve, which concludes on September 1, 2022.

Chief executive Serame Taukobong said the trading update demonstrated a challenging performance due to accelerated legacy migration, intense competitive landscape and consumers being under significant pressure due to rising fuel prices, interest rates and high unemployment rate.

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As Telkom Mobile value propositions remained attractive in the market to cater for affordability of its customers, its effective price per megabyte (MB) reduced by 14.8 percent year on year.

The increase in the traffic growth, however, was not sufficient to offset the decline in effective pricing.

The ongoing stage 4 load shedding exacerbated the weak performance, putting pressure on the cost base. Despite this, “we continue to optimise our roaming costs and benefited from the dual roaming partnerships,” he said.

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The continued growth trajectory in the fibre market was sustained, with the FTTH (fibre to the home) connectivity rate of 46.6 percent remaining the highest in the market.

The BCX IT business grew after a challenging period due to the easing of global supply chain constraints together with an increase in deal pipeline and win ratio, which signalled a positive outlook for the year ahead.

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BUSINESS REPORT

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