Leon Nicholas, Leon Nicholas, Leon Nicholas, INLSA

Telecommunications companies climbed on the JSE yesterday, reflecting investor optimism in the industry that has grown amid an ailing economy and on the government’s latest directive on spectrum.

MTN, Africa’s largest telecoms company, led the rally closing 3 percent higher at R109.98 a share. Telkom, the partly state-owned company, closed 2.69 percent stronger at R85.63 a share. Vodacom was 1.39 percent higher at R116.60 a share and Blue Label Telecoms, which owns a majority stake in Cell C, was 3.7 percent higher at R3.64 a share. Telecoms companies have grown revenues, subscribers and profitability metrics in the year to March, despite the rising food, fuel and electricity prices squeezing consumers. 

Communications and Digital Technologies Minister Stella Ndabeni-Abraham on Friday issued a directive to Independent Communications Authority of SA (Icasa) to make spectrum available and call for greater inclusivity from emerging and small businesses. Ndabeni-Abrahams said in the directive that more than 400 players that hold electronic communications network service licences, but cannot access spectrum due to its scarcity, should be allowed to use the wireless open access network or Woan. 

“This has an adverse effect on competition, contributes to the high costs to communicate and serves as a barrier to entry for new entrants and SMMEs,” the directive said. She said the government was committed to maximising the socio-economic benefits derived from the use of the spectrum. “The deployment of a Woan will encourage licensees to work together as far as it is practicable. The value of sharing and collaboration between licensees is that it will result in the more effective use of spectrum,” she said. In terms of results, Telkom showed a healthy growth in the year to March, with operating revenue up 5.3 percent to R41.8 billion from R39.6bn in 2018 mainly driven by a 58.3 percent increase in mobile service revenue to R8.5bn from R5.1bn in 2018. 

Vodacom was helped by its international business in the June quarter and posted a 1.2 percent decline in service revenue in South Africa due to Icasa data regulations. Peter Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said listed telecoms majors offered attractive dividend yields especially following weaker economic growth and South Africa’s interest rate cutting cycle. He said compared to the retail sector, the telecoms sector was able to weather the turbulence in the economy. “Even if the economy becomes tough, telecoms companies tend to be more defensive compared to retailers,” Takaendesa said. 

Takaendesa said the recent spectrum directive was also a boost for the telecoms industry, although it lacked detail. “The department issued the directive without being specific. It provided a skeleton, and Icasa has to provide flesh. I don’t think anyone knows for sure when the spectrum will be allocated. It will take at least six months for actual licensing,” said Takaendesa.

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