Telkom earnings plummet despite mobile growth

Telkom has released its annual results for the financial year ended 31 March 2020, showing significant growth for its mobile division while also reflecting a significant drop in fixed-line customers.

The group reported a 66.4% decline in headline earnings per share to 208.1 cents per share,

Telkom said that basic earnings per share decreased by 78.4% to 121.1 cents per share, impacted by the once-off costs of voluntary severance and early retirement packages, COVID-19, and a higher effective tax rate.

The company said that COVID-19 impacted the South African economy and subsequently its operations during the last two weeks of its financial year.

“This year also concludes a challenging decade of depressed economic growth, currency volatility, technology disruption, increasing competition and regulatory uncertainty – none of which Telkom has been spared from,” Telkom said.

Telkom’s group revenue grew by 3% to R43 billion despite a 22.2% decline in fixed voice revenue.

The mobile business remains a strong growth driver for the company, with service revenue increasing by 54.4% compared to the same period last year.

Telkom said that this makes it the fastest-growing mobile business in South Africa with 12 million subscribers.

“This was underpinned by our ongoing network investment and successful broadband-led propositions, which continue to resonate well with customers,” Telkom said.

“Despite ongoing competitive threats with changes implemented by our competitors in the mobile space, our broadband-led propositions are market-leading, being best in class for value and effective pricing.”

Revenue contribution and EBITDA

Telkom’s mobile business saw an EBITDA margin improvement from 1.4% to 14.9% over the past three years. The mobile EBITDA margin for the year ended 31 March 2020 is 18.6%.

BCX contributed positively to Telkom group revenue, which was supported by Telkom’s drive to grow its intellectual property.

Property division Gyro also contributed positively to group revenue thanks to an increase in demand for external leases within its mast and tower portfolio.

“Over time, as the revenue mix evolves, we expect the contribution from the fixed voice revenue to reduce and the contribution from the mobile business, with improved EBITDA to increase and offset the impact of fixed voice on group EBITDA,” Telkom said.

“Until the inflection point, management will focus on sustainable cost management to protect the profitability of the business.”

Telkom also said that while it offered voluntary early retirement and severance packages to 2,271 employees – 75% of which were accepted – there were no retrenchments at the company during the financial year.

Subscriber numbers

Telkom recorded a 19% year-on-year decline in fixed broadband subscribers, continuing the trend of DSL and FTTH subscribers leaving the company for other providers.

Mobile broadband subscribers grew by an impressive 28% over the past year, reaching 8.2 million.

Active mobile users increased by 23.9% to 12 million, with 20.8% and 36.8% growth in the prepaid and postpaid segments respectively.

Telkom said that looking forward, it will focus significantly on cost savings, which will include a restructuring programme to protect the profitability of the business.

Now read: Telkom fixed-line shocker

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Telkom earnings plummet despite mobile growth