Telkom has announced that group operating revenue for the first six month of the financial year is up 5,2% to R20,8-billion.
EBITDA was up 2,9% to R5,3-billion, with an EBITDA margin of 25,5%.
The group spent capex of R3,3-billion, with a capex to revenue ratio of 15,7%.
Free cash flow was up 118,6% to R179-billion. Headline earnings per share (HEPS) was down 3,3% to 288 cents and adjusted HEPS was up 10,3% to 328.6 cents.
The group has declared an interim dividend of 112 cents, down 5,1% from 118 cents.
Group CEO Sipho Maseko says the mobile business was a growth driver with an impressive service revenue growth of 53,8% to R3,6-billion, supported by strong customer growth of 50% to 6,5-million, with a blended average revenue per user (ARPU) of R104.
“Our affordable data-led products and broadband product propositions continue to resonate well with our customers,” he adds.
“The accelerated performance was underpinned by increased capital expenditure and increased store footprint.
“Openserve and Gyro also contributed positively to the group,” Maseko adds. “Openserve marginally increased its revenue, despite the decline in traditional revenue, while Gyro continued to grow external revenue and the mast and tower portfolio tenancy ratio.”
Notwithstanding the satisfactory performance, Maseko says the group felt the negative impact of the weak economic environment on our enterprise business as BCX, which serves all sectors of the economy, continued under pressure.
“In addition to the weak economy, BCX’s performance continues to be impacted by the decline in voice revenue,” he adds.
While fixed voice revenue declined by 12,4% and fixed data revenue was flat due to the accelerated decline in traditional products, Maseko points out that the new revenue streams are compensating for the decline in our traditional revenue streams – albeit at a lower margin.
“The declining traditional revenue is at a higher margin than the new revenue streams and our focus is to stimulate data traffic growth to preserve the overall margin,” he says.
“Our ongoing investment in new revenue streams has enabled the group to grow revenue in evolving technology, offsetting the shrinkage in traditional revenue.”
Telkom made capital investments of R3,3-billion during the period, with a capex to revenue ratio of 15,7%, which was at the lower end of its guidance.
“Mobile and fibre remain key capex focus areas with impressive returns in mobile service revenue,” Maseko says. “The investment in fibre to the home was rationalised in the period as we continue to focus on areas which show a propensity for higher connectivity rates.
“Our fibre to the home connectivity rate has improved to 35,6%, when compared to 24,5% in the prior year.
“We expect our capex to revenue ratio to be at the top end of our guidance by the end of the financial year, as we continue to invest in our new revenue streams,” he adds. “Our core and backhaul networks are largely modernised, and we are completing the upgrade of our access network with multiple technologies as customers become more technology agnostic.”
The investment in new technologies to drive future revenue streams has necessitated the evolution of Telkom’s skills base and the acquisition of various capabilities within the organization, Maseko says.
“Our focus remains on creating efficiency and effectiveness in the context of growing the business and achieving operational excellence through human capital investments,” h e says.
“We continue working on understanding the leadership and operational capability sets required to drive performance. This may include the reorganisation of functions, identification of skill gaps and, in certain instances, possible redundancies.
“Where we have identified gaps, we continue to be deliberate about the process to close out and generate value, while creating the necessary diversity among our teams. We continue to invest in talent within our organisation to retain key skills and ensure our future success.”