Telkom today released its annual results, reporting that operating revenue increased by 8,4% to R51,619-billion while operating profit decreased marginally by 1,4% to R14,470-billion.
Fixed-line business remains the major contributor, contributing 63% (versus 37% from the mobile sector) towards operating revenue; 68% (as opposed to 32% from mobile) towards operating profit; and 72% (versus mobile 28%) towards profit attributable to equity holders after inter-segmental eliminations.
Fixed-line revenue increased by 1,7% to R33,295-billion, largely as a result of a 12,6% increase in data revenue and an 8,3% growth in subscriptions and connections.
Telkom declared an ordinary annual dividend of 600 cents per share and a special dividend of 500 cents per share.
The group's EBITDA (earnings before interest, tax, depreciation and amortisation) margin decreased to 38,3% as at 31 March 31 2007 (compared to 43,2% at 31 March 2006) mainly due to higher fixed-line operating expenditure. The fixed-line business delivered an EBITDA margin of 38%, including the effect of raising the Telcordia provision of R527-million. The margin of 38% is within management’s guidance of 37% to 40%.
Net debt increased 45% to R9,901-billion, at a net debt to equity ratio of 30,9%.
Cash generated from operations increased by 4% to R20,520-billion. This facilitated capital expenditure of R10,037-billion and the repurchase of 12,1-million Telkom shares to the value of R1,6-billion.
Telkom acting CEO, Reuben September, says: “The Telkom Group has delivered continued revenue growth in its mobile business segment and its fixed-line business segment in the face of increasing competition in the telecommunication sector.”
He adds that fixed-line revenue grew by 1,7% despite tariff decreases and competition from mobile operators, VANS and ISPs.
“The fixed-line segment continued to focus on defending its revenue through value-adding bundled products and term and value discount plans for corporate customers. The group’s fixed-line segment showed its ability to deliver data solutions to support the Group’s revenue growth."
September also points to Telkom’s expansion strategy. “Telkom is proud to have delivered on its acquisition strategy with the acquisition of Africa Online during the year and Nigerian-based Multi-Links subsequent to year end.”
He adds that Vodacom again delivered an exceptional performance, increasing its subscriber base by 28,2% to 30,2-million customers.
Telkom is prepared for the challenges ahead in a more competitive landscape, September adds. “Telkom now enters a challenging period with Neotel as its fixed-line competitor coupled with significant pressure on its product and services pricing.”
However, to continue its drive to create value for its shareholders as well as protect and grow its market while taking telecommunications into the future, Telkom needs to invest in its future, September says. This is being achieved through investment into its Next Generation Network (NGN), Telkom Media (a company created to deliver on Telkom’s triple play strategy) and other parts of Africa. Investment in the NGN is a key enabler for delivering the required benefits in terms of products and services at a reduced cost with increasing volumes.