South African network provider, Telkom has delivered a solid top-line performance in the year to 31 March 2020, with revenue increasing 3.0% to R43.0 billion, mainly driven by a 54.4% increase in mobile service revenue. The company says its performance was underpinned by capital investments of R7.8 billion within the same period.
The mobile business continues to gain scale and remains the fastest-growing mobile business in South Africa. With 12 million customers, it now accounts for 35% of Telkom’s total operating revenues.
“Our Group revenue performance represents how ongoing investment – particularly in mobile, IT and masts and towers – enables Telkom to grow new revenue streams and offset traditional business shrinkage,” says Telkom Group Chief Executive, Sipho Maseko.
“We are seeing good returns on our investment, with mobile service revenue increasing by more than half and the connectivity rate for fibre-to-the-home improving from 38.4% in the prior year to 48.2% in the current year – the highest in the market.”
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined 8.7% to R10.3 billion largely impacted by the decline in high margin fixed voice revenues as well as an increase in costs related to mobile business growth.
In line with global trends, fixed voice revenue continues to decline, with the group actively migrating customers from legacy systems to newer technologies to protect revenues and improve customer experience.
The group invested in the migration of customers to LTE and fibre, however, a 22.2% decline in fixed-voice revenue has impacted group revenue growth as it works to reach the revenue inflection point of new technologies at lower margins.
The mobile business remains profitable with its EBITDA margin improving from 1.4% to 14.9% over the past three years.
Headline earnings per share declined 30.2% to 504.6 cents owing to an increase in finance charges and fair value movements and the decrease in EBITDA. EBITDA excludes the IFRS 16 benefit of R1.1 billion and workforce restructuring costs of R1.2 billion in the current year and R728 million in the prior year.
“Telkom has enjoyed the benefits of copper over the last 30 years. It has served us well. Now, we are investing in technology that will power Telkom for the next 30 years,” Maseko says.
Capital investments totalled R7.8 billion in the period, with capital expenditure in the mobile business up 22.1% to R3.7 billion. The accelerated investment in the packet-optical transport network, amongst others, will future-proof the core network.