JOHANNESBURG - Telkom intends to spend up to 20percent of its revenue on capital expenditure over the next three years, focusing on areas with strong returns such as mobile and fibre, the group said yesterday.
This comes amid the prevailing trend of growing data revenue and declining fixed-line voice revenue.
In the year to March, Telkom’s capital expenditure was R7.9 billion, which was 19.3percent of revenue for the year.
According to Telkom, the focus on mobile and fibre has paid off, because mobile service revenue increased 47.2percent, while active fibre to the home connectivity rate increased 30.7percent within three years of deployment.
“The capex investment to date is already bearing fruit with the growth in our new generation revenue streams, such as mobile service revenue and fixed data revenue, offsetting the decline in traditional revenue, such as voice revenue.
“We expect our operating revenue to grow mid-single digit over the next three years as we continue to grow our mobile businesses, fixed data and other future revenue streams such as cloud computing, Internet of Things, cybersecurity and big data analytics,” Telkom said.
In the year ended March 31, Telkom’s revenue was flat at R41bn, largely thanks to the 47.2percent increase in mobile service revenue.
“The growth in the mobile business was underpinned by capital investment, extension of distribution channels, increased store footprint and innovative data-led products which resonated well with customers. “Our mobile business is now a key driver of growth in the group, offsetting the decline in (subsidiaries) BCX and Openserve,” said group chief executive Sipho Maseko.
Telkom’s fixed broadband subscribers fell 2.2 percent, from just under 1 million to 981176 subscribers. On the other hand, mobile broadband subscribers soared 37.5 percent to 3.6million.
Fixed line voice usage and subscription revenue decreased by 8.7percent, from R13.5bn to R12.8bn. The company attributed the decrease to “mobile substitution.” There was a 9.3percent decrease in number of fixed access lines.
Mobile voice and subscriptions revenue increased 26 percent to R1.3bn. Telkom said there was a 30.2percent increase in the number of active mobile subscribers. Mobile data revenue increased 56.3percent to R3.7bn “driven by our strategy to focus on data which led to a 124percent increase in mobile data traffic volumes.”
Tough economic environment, political uncertainty, intense competition as well as low business and consumer confidence characterised the past financial year, according to Maseko.
He said Telkom was on the receiving end of a weak economic environment in which private and public sectors deferred and lowered their information communication technology spend. This had a bigger impact on BCX’s performance.
New generation revenue streams such as mobile and data were compensating for the decline in voice revenue.
“Despite their lower margin compared to traditional revenue streams, the new generation revenue streams will ensure Telkom’s long-term sustainability,” Maseko said.
Shmuel Simpson, an analyst at 36One Asset Management, said yesterday that an increase in the contribution of voice and fixed line to the group revenue was, to some extent, dependent on government spend.
“There is an expectation that, with the new leadership and a more optimistic economic outlook, there will be increased spend,” said Simpson.
Telkom shares closed 3.6percent lower at R51.70 on the JSE yesterday.