South Africa mobile network operator Telkom Group, which has operations in numerous other African country, has released its financial results for the four months period ended 31 December 2022, showing impressive top line growth in most of its verticals.

The company’s mobile data traffic and subscribers are up 25.6% and 12.9% year-on-year to 309 petabytes and 18.6 million subscribers respectively while mobile broadband customers are up 9.9% to 11.5 million, comprising almost 62% of active mobile customers.

Openserve, the Group’s fibre network operator subsidiary which was unbundled into a separate entity last year, reached a fibre-to-the-home (FTTH) connectivity rate of 45.9%, with the number of homes passed up 27.6% and homes connected up 31.0% while BCX, its enterprise IT consulting business, saw its revenue go up by 8.8% to R1.6 billion.

“Our mobile and broadband strategies continued bearing fruit. We saw good growth in broadband as our data-led and connect-led strategies continued to drive growth in mobile and fibre subscribers along with data usage. Mobile broadband customers now comprise almost 62% of total active mobile subscribers, while Openserve’s open-access network gained traction as external channels advanced to contribute more than 30% of its total revenue,” said Telkom CEO Serame Taukobong.

Overall, Telkom’s revenue is up 2.3% to R11 billion but its earnings before interest, taxes, depreciation, and amortisation (EBITDA) are down 13.5% to R2.5 billion, showing the company’s continued struggle with profitability and bottom line growth.

To address these challenges, Telkom is planning to embark on cost-saving programs to be implemented with sustainable benefits materialising over the next 6 – 18 months to mitigate cost pressures and improve the Group’s medium-term profitability. The benefits of the initiatives are however expected to be tangible in the next few years.

“Despite good top line growth and the ongoing optimisation of roaming costs, the migration of legacy products to NGN offerings, our investment in post-paid to drive higher annuity revenue from this base, and the impact of sustained nationwide load shedding put pressure on our costs, EBITDA and cash flows,” added Taukobong.

Telkom also stated that in addition to cost-cutting initiatives, in order to mitigate the impact of frontloaded investment in working capital as well as ongoing pressure on free cash flow, the Group plans to raise a further R1 billion by the end of FY2023 through the sale of qualifying device receivables to external financial institutions.

Looking ahead, the company expects even weaker bottom line growth in Q4 of its FY2023 offset by the ongoing upfront investment in working capital, continued accelerated load shedding and inflationary cost pressures.

Telkom, which recently announced that it had terminated merger talks with Rain, another South African mobile network operator, saw its share price jumped b as much as 7% following the release of the financial results.

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