Telkom, South Africa’s fixed-line telephone group, amazing turnaround continues to gain steam.
The company’s mobile business just reported outstanding 2018 financial figures, and 2019 is looking like it may be better.
The company is likely to benefit further from a long-term, multi-billion rand agreement whereby it will obtain roaming and facilities leasing services from Vodacom. The agreement, which was signed last week, will allow Telkom customers to roam on Vodacom’s 2G, 3G, and 4G networks, with the added benefit of seamless handover technology.
Telkom reported on Tuesday an operating revenue and EBITDA growth of 5.2% and 2.9% respectively for the six months to end-September 2018.
This is despite a challenging operating environment, where the country slipped into a technical recession while the consumer remained under pressure from increases in VAT, fuel prices and a weaker currency,
Telkom’s mobile was a growth driver for the telco with an impressive service revenue growth of 53.8% to R3.6 billion in the six months to end-September, supported by strong customer growth of 50% to 6.5 million, with a blended average revenue per user (ARPU) of R104.
The company is also gaining more mobile broadband customers. In the six months to end-September, Telkom saw its mobile broadband subscribers increase by 66.8% to 4.7 million.
More importantly, the company is achieving this impressive growth through its ‘affordable data-led’ products and broadband product propositions, which it believes “continue to resonate well with customers”.
Group revenue rose 5.2% to R20.8 billion, mainly driven by a 53.8% increase in mobile service revenue.
The company said its capital investment to date is already bearing fruit with our new revenue streams, such as mobile service revenue and fixed data revenue, driving growth for the group.
Telkom’s capital expenditure dropped 17% to R3.3 billion and the company said mobile and fibre remain capEx focus areas with impressive returns in mobile service revenues.
“Our ongoing capital investment in key growth areas underpinned our revenue growth and will help ensure Telkom’s continued profitability and offset a decline in traditional revenue,” Telkom Group CEO Sipho Maseko said.
“Our results attest to the success of our investment strategy and come despite a challenging operating environment.”
The business expects CapEx to revenue ratio to be in line with its guidance by the end of the year as they continue to invest in their new revenue streams which are now driving growth in an evolving technology where traditional revenue is dwindling.
Free cash flow recovered from negative R963 million in the prior year to positive R179 million. The improvement was mainly due to an 18.9% decrease in cash paid for capital expenditure and a 13.0% increase in cash generated from operations before dividend paid.