The impact of Covid-19 and the national lockdown have dominated the first half of the year and we saw the country facing macro-economic challenges.
Telco services have been an essential service during South Africa’s national lockdown therefore the telco industry demonstrated resilience during this time.
Telkom business units were impacted in different ways by the Covid-19 pandemic in the first half of the year.
The consumer business benefitted from the increased demand from people working from home and online schooling, while BCX and small-to-medium business (SMB) operations were negatively impacted with corporate customers under financial pressure.
Overall, group revenue showed resilience:
* The Consumer segment performed very well despite the national lockdown negatively impacting the distribution channels. The mobile business sustained its growth trajectory into the first half of the year. Mobile data which contributes approximately 70% of the mobile business was the main driver of growth driven by strong growth in mobile traffic. The mobile business continued to gain market share from its peers both from a customer and revenue perspective to become the third largest mobile telecom in South Africa in a period of ten years of establishment.
* BCX and SMB were negatively impacted by the national lockdown. Migration to work from home negatively impacted the Enterprise fixed business as the usage was diverted to mobile connectivity leading to a significant decline in fixed voice revenue. Enterprise customers reduced IT spend in the first half of the year and postponed some of their capital investment projects as a response to the heightened uncertain environment caused by Covid-19.
* The significant investments we have made in modernising the network including fiber backhaul, have enabled Openserve to carry increased traffic across its network and created a resilient ecosystem to support increased data demand witnessed during the Covid-19 pandemic. The lockdown has reemphasised the need for reliable fixed broadband connectivity. With more families working, studying and consuming multiple services from home, Openserve saw an increase in demand for fixed connectivity resulting in an improved fiber to the home connectivity rate. Similar trends were seen across Openserve Pure connect product portfolio which takes advantage of existing broadband infrastructure and supports the increased demand for data connectivity. However, the lockdown had a negative impact on enterprise fixed voice volumes and impacted Openserve negatively.
* From a Gyro Masts and Towers perspective, Telkom continued to commercialise our current tower portfolio in the period.
Management focused on its sustainable cost management programme to protect Group EBITDA and margin. The benefits of the restructuring programme were realised in line with management expectations.
Mobile cost to serve was optimised further impacting mobile profitability positively. Despite a significant decline in Group fixed voice revenue with higher margin, Group EBITDA and margin are broadly maintained.
Telkom liquidity remains resilient with a stable balance sheet. No debt has been raised since 30 March 2020. Management remains confident with cash release initiatives target of R700-million to R1-billion for the year as it continues with its working capital optimisation.
Management continued to be disciplined in capital allocation, capex rollout was slowed as a result of the national lockdown.
Shareholders are advised that Telkom entered into a payment plan with South African Revenue Services (SARS) to pay the outstanding liability (including interest) of R870-million, payable over a period up to 31 March 2021.This will be funded out of monthly cash flows.