Telkom’s Growth Engine Firing on All Cylinders

“This was driven by robust mobile growth, solid sustainable cost management and strong free cash flow generation.”

Telkom
Sipho Maseko, Telkom CEO

Telkom’s mobile business is a company reborn. A few years ago, Telkom Mobile, which was known as Heita and 8ta and launched in October 2010, was facing an uncertain future as South Africa’s fourth mobile operator.

Fast forward to today, and Telkom Mobile is back in the game and has surpassed struggling Cell C to become South Africa’s third-largest mobile operator.

Today, Telkom announced that Telkom Mobile is gaining more market share.

Telkom Consumer Business, which is run by Serame Taukobong, continues to be the driver of growth. The Mobile company sustained its growth trajectory with mobile service revenue growing by 40.7% to R12.5 billion in the nine months ended 31 December 2020, said Telkom.

The company informed investors that this was supported by 25.9% growth in active subscribers to 14.9 million and 23.9% increase in blended average revenue per user (ARPU) to R108.

But Telkom said the post-paid market remains challenging in terms of new connections due to consumers being under pressure.

“However, we saw a strong growth in post-paid ARPU of 15.6% to R212.”

The prepaid market remains the driver of new connections, and prepaid customer grew by 30.8% to 12.3 million. The mobile broadband strategy continues to pay off, the company said.

In a statement, Telkom added that mobile data revenue grew by 46.2% to R9 billion driven by strong growth in mobile traffic of 64.4% and 27.0% growth in mobile broadband customers to more than 10 million.

“This was enabled by a 9.7% increase in network rollout to 6 135 sites.”

Telkom
Telkom. Image source: Briefly SA

Group Performance

Telkom Group reported a 0.9% rise in revenue to R32 billion, driven by healthy growth of 40.7% in mobile service revenue. Group EBITDA increased by 8.5%, with the margin expanding to 26.6%. The company said this was driven by the benefit of the phase one restructuring programme of approximately R710 million realised to date.

“Telkom today published its market update for the nine months ended 31 December 2020. The Group delivered a solid set of results where growth was challenging due to COVID-19 and the strained South African economy,” Sipho Maseko, Telkom Group CEO said.

“This was driven by robust mobile growth, solid sustainable cost management and strong free cash flow generation.”

Telkom free cash flow stood at R2.8 billion (excluding the once-off payment of voluntary severance packages (VSP) and voluntary early retirement packages (VERP) of R1.2 billion) generated despite an accelerated Capex programme in the third quarter.

Telkom invested more than R5 billion in accelerated capital investment in the third quarter.

The company further informed investors that BCX performance remained under pressure posting a 9% decline in revenue R11.8 billion.

“To mitigate the impact of revenue decline in profitability, BCX focused on driving cost efficiencies. The cost efficiencies resulted in improved YTD EBITDA compared to the first half of the year.”

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