Telkom’s Growth Engine – Telkom Mobile – Shows No Signs Of Slowing Down

Serame Taukobong, CEO of Telkom Consumer Business

Telkom Mobile – a growth engine for Telkom Group – continues to experience strong mobile and data subscriber growth for the first quarter ended June 2021 despite concerns from experts that this growth would taper off as competition intensifies.

Telkom, valued at more than R20 billion, informed investors today that its revenue rose 3.5% year on year to R10.6 billion, mainly driven by the mobile business.

The company, led by Sipho Maseko, who is leaving next year, said the Mobile business and the Masts and Tower (M&T) portfolio sustained their growth trajectory into the first quarter.

While, the Consumer business, which includes Telkom Mobile, revenue grew 8.3% to R6.5 billion driven by growth in the mobile revenue.

The Mobile service revenue rose 13% to R4.4 billion. The company said this was supported by 36.3% year on year growth in active customers to 16.1 million.

Telkom said the postpaid market remains challenged in terms of new connections due to consumers being under pressure from a weak economy.

“We remain prudent with our credit management approach and are focusing on our customer value management to preserve and grow the average revenue per postpaid customer. Despite the challenging environment, our postpaid customer base was relatively flat compared to the prior year at 2.6 million with postpaid ARPU up 3.8% year on year to R221,” the company said.

Telkom added that the prepaid market remains the driver of new connections; prepaid customers grew by 46.8% to 13.5 million. In the quarter under review, Telkom recorded 744 485 prepaid net additions. Prepaid ARPU declined by 15.3% to R68 compared to R80 reported in the prior year due to the significant slowdown in working from home and online schooling.

“What has been encouraging is the Mobile business sustaining its growth trajectory despite a very strong prior year first quarter, with postpaid ARPU holding steady at around R220,” said Maseko.

“Our Masts and Tower portfolio continued to grow and expanded its footprint. We have also seen a recovery in the Converged Communication business in BCX with this business recording growth while the IT business remains under pressure.

Sipho Maseko, Telkom CEO

“For the first time since the technology migration at Openserve, the number of homes connected with fibre surpassed the number of homes connected with copper. Although the overall fixed business is still declining, we noted positive recovery in the fixed voice usage and fixed data connectivity revenue compared to the prior year boosting the performance of Openserve.”

“This has been enabled by our ongoing capital investment and broadband led strategy which underpins the evolution of our business. Today, the new revenue streams, being mobile, IT, fibre and masts and towers contribute more than 70% of Group revenue and remain the driver of the topline growth and the profitability of the business”, Maseko concluded.

BCX remains under pressure due to a weak economy

The South African economy continues to be under pressure due to the impact of COVID-19. BCX, which serves all the sectors of the economy, has performed in direct correlation with decreased South African GDP growth.

“We continue to see sluggish IT spend and investments by Corporates as the country battles with the impact of COVID-19 and the effects of restrictions on parts of the economy due to lockdowns. COVID-19 is an ongoing risk and management is driving initiatives to mitigate the risk,” the company said.

The IT business is hardest hit by the challenging environment, with revenue down 11.8% to R1 827 million due to delayed investment in IT by enterprise customers. No significant churn was observed from existing customers.

“To mitigate the impact of the overall revenue decline, management focused on driving cost efficiencies with BCX EBITDA margin expanding by 2.2 ppts to 12.9% compared to the prior year.”

Openserve on a recovery path

Openserve revenue came in at R3.3 billion, showing a R48 million or 1.4% decline compared to the same period last year.

“This small decline indicates recovery in Openserve’s revenue following the four previous successive years of significant decline in revenue,” the company said. “This is attributable to growth in high capacity links for carriers, an increase in demand for fibre services and a slowdown in fixed voice churn, which has a much smaller proportionate impact than prior years.”

Significant strides were made in the fibre business, increasing the number of homes passed by 34.3% to 612 451 following fibre rollout and supply chain challenges from the international lockdown in the prior year. The number of homes connected with fibre increased by 32.2% to 306 837 representing a fibre connectivity rate of 50.1% which remains the highest in the market.

“We have reached an inflection point, where the number of homes connected with fibre of 306 837 surpassed the number of homes connected with copper of 264 186. Despite the decline in the overall fixed broadband numbers, we have seen an increase in usage with fixed broadband traffic up 4.4%,” said Telkom.

“More than 60% of our broadband customer base utilise speeds exceeding 10 Mbps. The decline in the fixed voice business continued in the period under review driven by SMEs, which was partially offset by an improvement in the Enterprise segment.”


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