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Home»Boardroom Games»Telkom Mobile is Firing on all Cylinders
Boardroom Games

Telkom Mobile is Firing on all Cylinders

Gugu LourieBy Gugu Lourie2020-06-22Updated:2020-06-23No Comments4 Mins Read
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The successful delivery of broadband-led propositions by Telkom and pushing its mobile business to deliver solid financial results caught our attention.

This resulted in Telkom Mobile delivering a 54.4% rise in service revenue from a higher base to R12.6 billion to remain the fastest growing mobile business in the country.

One of the things that we found to be of interest is the fastest growth in subscriber numbers for Telkom Mobile.

“This was underpinned by our ongoing network investment and successful broadband-led
proposition, which continue to resonate well with customers,” said Telkom CEO Sipho Maseko.

“Despite ongoing competitive threats with changes implemented by our competitors in the mobile space, our broadband-led propositions are market-leading being best in class for value and effective pricing”

The solid growth in mobile business was supported by a 23.9% increase in customers to 12 million with a blended average revenue per user (ARPU) of R91.

Telkom said pre-paid customers grew 20.8% to 9.4 million, with net additions of 1.6 million.

Despite the growth in pre-paid customers, pre-paid ARPU declined by 8.2% to R66.
The post-paid customer base increased by 36.8% to 2.6 million at an ARPU of R188. Post-paid ARPU trends have improved following a 7% decline in the first half of the year and demonstrated marginal growth compared to 2019.

Maseko added that Telkom’s mobile business remains profitable, with its EBITDA margin improving from 1.4% to 14.9% over the past three years.

As a result, Telkom’s revenue increased by 3% to R43 billion, mainly driven by a 54.4% increase in mobile service revenue underpinned by accelerated capital investment and the mobile broadband-led proposition.

Telkom’s capital investment of R7.8 billion, with capex to revenue of 18%, underpins growth.

“More than 47% of the capital investment was in the mobile business, increasing by 22.1% to R3.7 billion. We are seeing good returns, with mobile service revenue increasing by 54.4%,” said Maseko.

“The accelerated investment was to support growth in the mobile business and to prepare
for the accelerated migration of customers to LTE/LTE-A and fibre.”

Telkom Consumer’s revenue performance improved by 13% to R21.7 billion.

“This was driven by the mobile business’s continued growth trajectory, with service revenue increasing 54.4% to R12 593 million, underpinned by a successful data-led value proposition and ongoing network investment,” said Maseko.

“We have seen a decline in fixed voice revenue due to the migration of traditional generation copper-based network customers to newer technologies.”

Telkom said the strategic intent of focusing spectrum resources towards 4G contributed to an increase in smartphone sales.

Mobile data revenue grew 48.2% to R8.8 billion, supported by a 28% increase in mobile broadband subscribers, as well as attractive data propositions.

“We will continue to drive aggressive broadband growth in untapped segments to ensure
competitiveness,” said Maseko.

“We will lead with high-speed mobile broadband in these markets, with an option to switch to fibre.”

Mobile Network Expansion

Over the years, Telkom continued with its mobile network expansion programme with an emphasis on 4G.

“We increased our capex investment by 22.1% to R3.7 billion, increasing our base stations. We increased our base stations by 14.6% to 5 862, of which 71.1% are LTE time division duplex (TDD) capable and 100% are LTE frequency division duplex (FDD) capable,” said Maseko.

“The expansion aligns with the strategy of building a 4G and 4.5G data network to carry big volumes of data traffic and is the largest mobile data network in South Africa.

“We refarmed a significant portion of the 1 800 MHz spectrum and started reforming portions of 2 100 MHz for LTE and LTE-A. Refarming the 1 800 MHz spectrum allowed us to switch off and decommission most 2G access nationally, resulting in an improved 4G experience. We upgraded over 30% of base station backhaul to cater for data growth.”

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