In a challenging competitive landscape, Telkom Consumer recorded a 2.6% increase in revenue, reaching R6,589 million for the first quarter ended 30 June.. This improvement is attributed to Telkom’s data-centric approach, driven by both the Mobile business and the expansion of our fibre offerings.
Revenue growth in the Mobile business was propelled by a 9.5% increase in external mobile service revenue, amounting to R4,996 million. Total external revenue rose by 5.3%, reaching R5,737 million.
“This growth was fueled by our continuous delivery of innovative and value-oriented offerings, significantly boosting data consumption. Consumers increasingly sought value through our personalised pricing platform, Mo’Nice, which now accounts for 35.4% of total service revenue,” said Telkom.
“Our performance was further bolstered by the strengthening of our subscriber base, which grew by 14.6% to 21.2 million total mobile subscribers. This is characterised by a blended ARPU of R81 (Q1 FY2024: R83). The post-paid subscriber base remained steady at approximately 3.0 million, with an ARPU of R183 (Q1 FY2024: R183). Meanwhile, the pre-paid segment experienced a 17.4% increase, reaching 18.2 million subscribers with an ARPU of R62 (Q1 FY2024: R63).”
Telkom also announced today that its data-led strategy, centred on providing an unparalleled customer value proposition, has led to a 25.8% surge in mobile data traffic, reaching 414 petabytes. This growth was bolstered by a 15.1% increase in mobile broadband subscribers, totaling 13.5 million, which comprises 63.5% of total subscribers.
Consequently, our mobile data revenue experienced a solid growth of 12.9%. Additionally, we saw an 8.0% increase in the fibre subscriber base, with a 12.5% growth in ARPU, resulting in a 25.1% increase in revenue from fibre.
Telkom Group revenue was up 3.9% to R10.9 billion and group next generation (NGN) revenue rose by 7%, while group EBITDA climbed by 24.1% to R2.78 billion.
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“Telkom had a good start to the financial year with pleasing performance on the top line benefiting from our data-led strategy and compelling value propositions. Our next generation revenue streams continued their positive momentum and grew by R576 million, an increase of 7.0%. NGN revenues now comprise 80.7% of Group revenue,” said Serame Taukobong, Telkom’s CEO.
NGN broadband offerings, enabled by our ongoing capital investment in our mobile and fibre networks; have positioned Telkom advantageously as the best value mobile network while the connect-led strategy for our fibre network further improved the market-leading home connection rate to 49.0% for the quarter. These capex investments give our networks the capacity to accommodate and handle high data traffic demands from our retail and enterprise customers, on already existing mobile and fibre infrastructure.
“We are pleased that the Group expanded its EBITDA margin by 2.3 percentage points (ppts) from 31 March 2024 driven by top line growth and stringent cost management, despite inflation causing upward pressure on costs as our ongoing cost optimisation initiatives yield positive results. We continue to focus on cost containment while simultaneously monetising our networks by adding to our mobile sites and
expanding fibre footprint where these investments contribute to top line growth and overall profitability.”
Openserve Maintains Momentum in Next-Generation Expansion
Openserve’s NGN (Next Generation Network) products and services have continued their upward trajectory, with fixed data NGN revenue increasing by 7.1% year-over-year. By differentiating its product portfolio and strengthening its external wholesale channels, Openserve’s contribution to Telkom’s overall revenue grew by 9.2%, reaching R1,179 million. These channels experienced a strong NGN revenue growth of 9.0% year-over-year, with NGN connectivity now representing more than 94% of Openserve’s overall external wholesale revenue.
Despite the ongoing growth in NGN services, overall revenue declined by 2.4% to R3 billion year-over-year, primarily due to a 28.4% (R188 million) decrease in voice and legacy revenue. However, Openserve’s strategic focus on expanding its network led to a 13.4% increase in homes passed, reaching 1,256,603 homes. The connect-led strategy yielded positive results, with a 19.5% increase in the number of homes connected, totaling 615,430, and achieving a market-leading connectivity rate of 49.0%.
With rising demand for connectivity and high-speed broadband, data consumption grew by 33.0% to 681 petabytes for the quarter. We are confident that our capital investments in modernising and transforming our network will continue to enable us to connect more homes and meet the higher bandwidth requirements of our customers.
BCX Revenue Up Supported by Growth in IT Business
BCX revenue increased by 2.4% to R3.1 billion, driven by strong performance in the IT hardware and software sector.
The IT business reported a revenue growth of 7.1%, reaching R1,790 million. This was primarily due to the continued overperformance of the software and hardware segments, which saw a 22.5% year-over-year revenue growth. This growth was driven by an increase in new business and the clearing of backlog orders.
While the low-margin hardware and software business supports overall revenue growth, this strategy allows BCX to access a wider client base, facilitating the sale of high-margin IT services to improve product mix. The significant growth in the IT hardware and software sector was primarily due to a 29.8% increase in the local business unit. Meanwhile, IT services revenue remained stable at R1,117 million.
Swiftnet Continues to Grow with Increased Focus on Power-as-a-Service
Swiftnet continues to augment and commercialise its business by adapting to changing market conditions and identifying additional revenue opportunities, all while maintaining strong EBITDA margins.
The tower build programme remained on track, with four towers and one In-Building Solution (IBS) site constructed during the quarter.
Swiftnet’s revenue for the first quarter increased by 5.2% year-over-year, reaching R343 million. Revenue from growing customers rose by 14.5% to R285 million, driven by inflationary escalations, new tenancies, 5G expansion, antenna upgrades, and new tower builds and IBS. This growth reflects our customers’ focus on network improvement and modernisation.
R161 Million Proceeds from Disposals of Non-Core Property
Gyro continues to streamline its property portfolio by accelerating the disposal and transfer of properties that are no longer essential to the Group’s operational requirements. This ongoing process aims to reduce the property footprint, optimize property operating costs, and generate cash for Telkom.
At the start of the year, 42 properties with a sales value of R287 million were undergoing the conveyancing process, with a target to transfer them during the financial year. So far, we have successfully transferred 19 properties, realising sales proceeds of R161 million in the first quarter.
In June, we completed the first auction for additional properties approved during the quarter, resulting in sale offers for nine properties totaling R33 million. The signature of sale agreements is currently in progress, ahead of the commencement of the conveyancing process. Gyro plans to dispose of more non-core properties, including those previously earmarked for property development, throughout the rest of the year.
Group Debt Actively Managed and Debt Profile Continues to Improve
Telkom recently raised funds through a public bond auction in the debt capital markets, successfully issuing two bond instruments with 3-year and 5-year tenors, raising R345 million and R405 million, respectively. The R750 million will refinance maturing debt and address upcoming maturities in FY2025. The issuance was achieved at competitive pricing, improving the Group’s debt maturity profile and liquidity. This is seen as an affirmation of the Group’s outlook by local debt capital markets, which will continue to be a source for refinancing bond maturities.
Telkom Credit Rating Affirmed by Moody’s
On July 11, 2024, Moody’s affirmed Telkom’s corporate family rating as Ba2 and the national scale rating as Aa2.za with a stable outlook. According to Moody’s, these ratings are supported by Telkom’s leading market position in South Africa’s fixed-line business as the operator of the largest fibre network in the country, adequate financial policies, and the expectation that Telkom’s credit metrics will strengthen over the coming 12-18 months.
