Telkom’s profit halves
Telkom profit halved in its latest half-year results amid a drop in revenue and a consumer exodus to fibre and LTE.
The firm, worth R18.3bn on the JSE, reported on Wednesday in its results end-september that profit fell 52.9% y/y to R641m and HEPS, which strips out impairments and one-off items, fell 51.9% to 137.2c.
Revenue dipped 0.7% to R21.15bn, as fixed, mobile and IT service revenue fell amid strained economic conditions.
High inflation, interest rate hikes and unemployment put consumers under pressure and weighed on spending.
A client shift from its legacy fixed business to new technologies such as fibre and LTE worsened the problem, but higher mobile handset, IT hardware and software sales partly offset the impact. “A pricing and margin gap remains between the new business and legacy businesses. The accelerated decline in legacy fixed business limited overall performance,” it said.
Core earnings decreased by 17.3% to R4.94bn and its core earnings margin contracted 4.7 percentage points (pp) to 23.4%, because of a decline in legacy revenues and pressure on its cost base. “Direct costs increased, driven by higher handset and equipment costs,” the company said. “While the rest of the operating costs were wellmanaged, energy costs increased significantly due to the sustained load-shedding.”
This was partly why services fees rose more than one-fifth as diesel prices rose and higher advisory fees were incurred largely for mergers and acquisition-related transactions and strategic projects.
The latest results makes for sombre reading months after a tug-of-war between MTN and Rain over Telkom, but MTN has since withdrawn its offer, leaving Rain as the only potential suitor. Telkom continues to invest in fibre and mobile as new areas of growth.
“We expect modernisation to continue over the next year, coupled with the deployment of new base station sites as the mobile network operators (MNOS) deploy their new permanent spectrum allocations,” CEO Serame Taukobong said.
Fixed broadband subscribers declined 0.1% to 562,080, mobile broadband subscribers rose 3.7% to 11.03-million, active mobile subscribers jumped one-tenth to 18.02-million and fibre homes passed and connected advanced more than one-third to 443,469.