The Telkom group recorded a 19,2% decrease in profit after tax to R3 158-million for the year ended 31 March 2018.
This is mainly attributable to an increase in the taxation expense and a 3,6% decrease on earnings before interest, taxation, depreciation and amortisation (EBITDA) of R10 544-million, resulting in an 18.4 percent decrease in headline earnings per share (HEPS).
Group CEO Sipho Maseko says the year was characterised by a tough economic environment, political uncertainty and intense competition as well as the consequent low business and consumer confidence.
“We felt the impact of the weak economic environment, as the private and public sectors respectively deferred and lowered their ICT spend. This impacted Telkom’s performance, particularly in BCX, which serves the business sectors.”
Group revenue was flat at R41-billion, supported by a 47,2%increase in mobile service revenue. The growth in the mobile business was underpinned by capital investment, extension of distribution channels, increased store footprint and 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 BCX and Openserve,” Maseko says. “The pricing transformation journey that Openserve embarked on two years ago is starting to bear fruit with the rate of decline in their revenue slowing down.
“Despite the price reductions and ongoing voice revenue pressures, Openserve’s overall revenue declined by only 2,9% while data traffic grew massively in the network.
“The weak economy led to deferred corporate ICT spend and reduced public sector spend, which hampered BCX’s performance,” he adds.
“Voice is impacting our businesses across the group as a traditional technology – customers are migrating from circuit voice to voice over internet protocol (VoIP). We have implemented strategies to manage the decline in voice revenue while we migrate customers to VoIP and grow our new generation revenue streams.
“I am pleased that the new generation revenue streams, such as mobile and data, are now compensating for the decline in the traditional business,” Maseko says. “Our focus going forward is to increase the contribution from the new generation revenue streams.
“Despite their lower margin compared to traditional revenue streams, the new generation revenue streams will ensure Telkom’s long-term sustainability.”
The group continues to invest in its network for future growth and invested R7,9-billion in capex, which is 19,3% of revenue. Mobile and fibre remain key capex focus areas, and have delivered strong returns – mobile service revenue grew by 47,2% and active fibre to the home connectivity rate increased to 30,7% within three years of deployment.
“Over the past few years, we have been focusing on modernising the core and backhaul networks and, more recently, the access network. Our investment in packet optical transport network (POTN) establishes an Internet Protocol (IP) enabled optical transmission capability that can scale to meet the demands of the Fourth Industrial Revolution, catering for higher speeds, increased capacity requirements, lower latency requirements and digitalisation of the network fabric,” says Maseko.
“Our core and backhaul networks are largely modernised, and we are completing the upgrade of our access network with multiple technologies as customers are becoming technology agnostic.
“It is imperative for us to continue to modernise our network and invest in key growth areas in line with our strategy,” he adds
“Our people are our number one asset and having the right talent in the right place will determine Telkom’s ability to execute our strategy sustainably. We have been focusing on bringing in new talent and refreshing skills. We made a number of external appointments to the group’s and BCX’s executive committees. These individuals have a wealth of experience and the skills that will take Telkom forward.”