Telkom takes a beating
Telkom has published interim results for the first half of its 2023 financial year (H1 FY2023), revealing a decline in operating revenue as its mobile and fixed service divisions struggled to perform.
Telkom Group CEO Serame Taukobong said the period from April 2022 to September 2022 was characterised by intensified competition and strained economic conditions placing consumers under pressure.
“Group performance suffered under a sluggish economy, the increasing electricity and fuel prices, rising interest rates cycle, and high unemployment, which constrained and impacted levels of consumer spending,” said Taukobong.
The company’s overall operating revenue declined by 0.7% from around R21.29 billion by September 2021 to R21.15 billion by September 2022.
Mobile service revenue, which accounted for the most significant chunk of this revenue, was also down 0.7% — declining from R8.85 billion to R8.78 billion.
That is despite Telkom’s active mobile subscribers climbing from 16.26 million to just over 18.02 million, an increase of 10.9%.
However, the average revenue per user (ARPU) declined by 4.9% — from R92.40 to R87.87.
Fixed-service revenue recorded a much bigger plunge from R6.97 billion to R6.28 billion — a drop of 9.8%.
Telkom attributed this to its legacy fixed-line business remaining under pressure due to migration from traditional fixed voice to newer technologies.
An increase of 10.8% in revenue from next-generation fixed services like fibre-to-the-home was not enough to stop an overall 4.3% revenue decline for its wholesale fixed business Openserve.
Telkom said while over 65% of its fixed service revenue was derived from next-generation products and services, there was a pricing and margin gap between the new and legacy businesses.
“The accelerated decline in legacy fixed business during the period limited overall performance,” the company said.
Information technology revenue helped to somewhat stabilise the overall revenue decline, with an increase from R2.68 billion to R3.12 billion.
Telkom shareholders enduring pain
Further indications of Telkom’s dismal performance include its earnings before interest, tax, depreciation, and amortisation (Ebitda) plummeting 17.3% from R5.98 billion to R4.94 billion.
The company’s cash balance was also eroded from R3.39 billion to R2.50 billion.
Telkom shareholders have endured pain as a result of the performance — with headline earnings per share crashing 52.5% from 285.5 cents to 137.2 cents.
“Returning cash to shareholders remains a key element of our capital allocation framework,” Telkom stated.
“Telkom is in the final year of the three-year dividend policy suspension period. The Board remains committed to reinstating the dividend policy at the end of FY2023 and is reviewing the policy.”
The graph below summarises the key financial indicators from Telkom’s H1 FY2023 results.
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