In the latest financial quarter ending December 31, Telkom, South Africa’s third-largest telecommunications company, reported that its core profits remained unchanged, demonstrating resilience in the face of mounting inflationary pressures, ongoing power outages, and an increase in bad debt provisions. Despite these challenges, the company’s strategic cost-reduction measures have played a crucial role in stabilizing earnings before interest, tax, depreciation, and amortisation (EBITDA) at 2.5 billion rand ($132.45 million).
However, Telkom faced a slight dip in its EBITDA margin, which fell to 21.9%, primarily due to a shift in product mix within its Information and Communications Technology (ICT) sector, particularly in its BCX business. The company also noted higher-than-anticipated credit losses on trade receivables, attributing this to the financial strain experienced by both retail and enterprise customers amid a sluggish macroeconomic landscape.
On a brighter note, Telkom reported a 2% increase in overall group revenue, reaching 11.3 billion rand. This growth was propelled by attractive data-connectivity offerings across both mobile and fixed networks. Mobile revenue saw a healthy 4.8% rise to 5.9 billion rand, while revenue from Openserve, Telkom’s fibre business, surged by 6.2% thanks to its next-generation fixed data services.
“The growth in revenue can be attributed to higher recharges by prepaid mobile subscribers and the continuous expansion of our fibre network to homes and businesses through Openserve. This was further supported by Swiftnet’s successful commercialization of the masts and towers portfolio,” Telkom stated. The company also highlighted that enterprise demand for hardware and software through BCX remains strong, registering double-digit growth. However, this was somewhat offset by a decline in traditional voice and data revenue as customers transition to next-generation products like fibre.
In related news, Telkom has made significant strides in selling its mast and tower business, Swiftnet. The company revealed that substantial progress has been achieved in fulfilling the agreed milestones under the exclusivity arrangement, with advanced negotiations to finalize the transaction agreements. Last November, Telkom announced exclusive talks with a preferred bidder—a consortium of equity investors, including a Black Economic Empowerment partner, managed by a reputable private equity firm.
Swiftnet itself reported a revenue increase of 4.7%, totaling 333 million rand for the quarter, underscoring the subsidiary’s contribution to Telkom’s overall financial performance.
As Telkom navigates the complexities of South Africa’s telecommunications landscape, its efforts to balance cost-reduction with innovative service offerings have helped maintain a stable financial footing. The company’s strategic moves, including the potential sale of Swiftnet, signify Telkom’s commitment to adapting its business model in response to evolving market demands and the shifting preferences of its customer base.
