Telkom has reported stronger operational performance and improved financial results for the 2024 financial year, with group revenue up 1,6% to R43 230-million. Mobile service revenue is up 6,8% to R19 026-million, with more than 20-million subscribers.
Openserve’s fibre connectivity rate advanced to 48,5% as Telcom prioritised monetising its fixed network, and passed more than 1,2-million homes with fibre.
BCX made strides in growing its IT service revenue, and Swiftnet’s tower rollout programme and tenant growth further contributed to revenue
growth and margin expansion for the group.
Telkom invested R6,1-billion towards network resilience, expanding the mobile network, modernising the fixed network infrastructure and fortifying its skills and capabilities for ICT managed services. This investment included spectrum, which is already deployed.
The group made progress on its strategic imperative to unlock value through the proposed disposal of Swiftnet for R6,75-billion, with transaction presented and approved by shareholders on 24 May 2024.
Increased operating margins were driven by continued demand for and growth of Telkom’s next-generation (NGN) offerings. Stronger operational performance along with cost-optimisation initiatives contributed to a normalised EBITDA growth of 5,2% to R10-billion. Including non-recurring restructuring costs in the prior year, reported EBITDA advanced by 18,4%.
Total headline earnings per share (HEPS) and basic earnings per share (BEPS) increased by more than 100% to 376 cents and 385,5 cents, respectively, driven by improved operational performance. From a loss position in the prior year, profit for the year also increased by more than 100% to R1,9-billion, boosted by the non-recurrence of once-off restructuring costs and lower depreciation, while higher interest rates increased net finance costs compared to the prior year.
Cash generated from operations increased by more than R4-billion excluding restructuring costs. Better-than-expected positive free cash flow of R424-million was driven by improved operational performance and the group’s measured approach towards capex.
Openserve increased its external channel revenue significantly by 10,7% to R4 526-million, driven by next-generation fibre connectivity that now constitutes more than 93% of Openserve’s external wholesale revenue.
This external growth contributed to the total NGN fibre revenue, which grew by 7,4% and now represents 76,4% of Openserve’s overall revenue of R12 511-million.
The next-generation fibre revenue growth was driven by continued growth of 16,1% in broadband connectivity (fibre to the home), while the enterprise and carrier segments grew by 4,8% and 2,5%, respectively.
Openserve continued to optimise its sites and implemented green energy solutions in the form of solar and lithium-ion batteries to support an always-on network thus reducing its dependency on high-cost energy solutions. These and other cost-reduction initiatives contributed to margin
expansion, and EBITDA improved by 6,6% to R3 934-million, yielding an EBITDA margin of 31,4% (+2,8 percentage points).
Openserve invested R2 547-million to modernise its network and drive fibre deployment to pass 1 217 110 homes, a 17% increase. Its connect-led strategy continues to see positive results, enabling it to increase its homes connected by 19,8% to 590 527, sustaining its leadership in the market with the highest connectivity rate of 48,5% (+1,1 percentage points).
Openserve continued to show network availability uptimes of 99,86%, 99,85% and 100% across its access, transport, and core network layers, respectively. The resilience and high availability of its network could also be seen through the growth in data consumption of 2 307 petabytes, an increase of 21,7%.
Telkom Consumer remained resilient in delivering high-speed broadband solutions across both the mobile and fibre segments, increasing external revenue by 2,2% to R26 140-million. Total external revenue from Mobile operations increased by 4,5% to R22 583 million, driven by 6,8% growth in Mobile service revenue. Mobile service revenue growth was primarily due to mobile data revenue, which increased by 10,6%, contributing R14 300-million to total mobile revenue.
Telkom focused on sustainable growth, refining operational efficiencies and optimising cost structures. EBITDA grew by 24,2% to R4 093-million as a result, and the EBITDA margin expanded to 15,5% (+2,8 percentage points). The Mobile business also improved its EBITDA margin to 22,2% (+1,7 percentage points), despite the adverse effects of loadshedding and higher expected credit losses due to economic pressure on consumers.
In a highly competitive market, Telkom grew its mobile subscriber base by 11,9% to 20,4-million, with a blended average revenue per user (ARPU) of R84 (FY2023: R86). The pre-paid base expanded by 14,3% to reach 17,5-million subscribers, fueled by the acquisition of higher-quality connections and improved recharging behaviour and ARPUs within the existing customer base.
The post-paid base remained relatively stable at 2,9-million subscribers. Mobile broadband subscribers increased by 9,5% to 12,7-million, representing 62,3% of Telkom’s total mobile base now using wireless broadband.
The group invested R2 598-million in Mobile capex, including R972-million for spectrum. This enabled it to expand network coverage by 2,5%, grow its presence to 7 738 sites, and maintaining network resilience by replacing over 5 688 lithium-ion backup batteries and repairing more than 1 606 sites.
The 4G device adoption rate exceeded 92%, informed by Telkom’s data-led strategy. Currently, 51% of data traffic is routed through its 4.5G network (primarily serving fixed wireless access) and 46% through its 4G network (predominantly catering to mobile data services). Telkom as deployed 465 active 5G sites since launching its 5G services in 2022.
BCX reported that revenue declined by 2,3% to R12 915-million.
IT revenue increased by 9,9% to R7 262-million, largely due to a strong performance from the hardware and software business. This performance, albeit at lower average margins, was driven by new product deals, existing software contract renewals and record cross-border sales.
IT Services performed well, increasing revenue by 6,6% to R4 789-million. This was supported by strong cybersecurity growth and steady growth of the data centre and infrastructure solutions business as demand for storage and cloud computing continued to grow in the market.
Converged Communications revenue declined by 14,5% to R5 653-million as BCX continued migrating customers to next-generation technologies. Accordingly, revenue from next-generation services grew by 28,7% while legacy products continued to decline as envisaged.
While BCX reduced some operating costs, this was not sufficient to offset the combined effects of revenue mix at lower margins, the decline in higher-margin legacy revenue, and higher expected credit losses on trade receivables. Consequently, EBITDA reduced by 28,4% to R1 294-million at a margin of 10% (-3,7 percentage points).
Swiftnet continued to commercialise its masts and towers portfolio as customers continued to invest in improving their network performance and capacity through equipment upgrades and modernisation. Swiftnet’s revenue growth was limited to 1,3% (R1 321-million), impacted by terminations from two customers. Revenue from other customers increased by 10,7% to R1 018-million on the back of inflationary escalations, new tenancies, 5G rollouts and upgrades.
EBITDA increased by 10,4% to R990-million at an EBITDA margin4 of 74,9%, attributable to the optimisation of tower operating costs.
The masts and towers build programme gained momentum, with 68 towers and eight in-building solution sites being constructed, resulting in 4 047 total productive towers. The rollout of Power-as-a-Service (PaaS) at scale began in the final quarter of the year, with 18 PaaS solutions for customers being built and connected.
Gyro shifted its focus in FY2024 following the board’s decision to exit property development and focus on managing the group’s property portfolio for core operational purposes. Gyro focused on optimising the Telkom Group property footprint and improving energy efficiency.
It accelerated the disposal of decommissioned properties no longer required, generating R92-million in cash proceeds from the transfer of 56 sold properties. A further 42 properties with a sale value of R287-million remain in the conveyancing process and are expected to transfer during FY2025.
The implementation of various energy interventions improved the resilience of Telkom’s mobile and fixed networks and contributed meaningfully to reducing the group’s carbon emissions. Scope 1 and 2 emissions decreased by 65 747 tCO2e, a 9% reduction that exceeded the 4.2% target for the year.
Group revenue increased by 1,6% to R43 230-million, driven by an increase in mobile data and NGN fibre data connectivity revenue of 10,6% and 14,5%, respectively. This was partially offset by a 23,4% decrease in fixed-voice revenue due to the ongoing migration to modern technologies such as fibre and LTE, a 20,7% decrease in customer premises equipment and a 6,8% decrease in mobile handset sales.
Group EBITDA increased by 5,2% to R10 041-million, with the EBITDA margin expanding 0,8 percentage points to 23,2% compared to FY2023. The Group revenue increase of 1,6% and decrease in cost of handset, equipment and directories and payments to other operators of 3,4% and 2,1%, respectively, were offset by 1,4% higher operating expenditure (opex) and a 9% increase in sales commission and incentives from Mobile.