Telkom’s share price dropped by 3.8% on Wednesday as the telecommunications giant reported a 53% decline in profits to R641 million for the six months between April and September 2022.
Although earnings declined significantly, Telkom reported strong growth in active mobile and mobile broadband subscribers.
Telkom said it expects this growth to continue for the rest of the 2022/23 financial year.
“The Mobile business has shown good and continued subscriber growth as it enhanced its broadband offering, entrenching its market position,” Telkom said in its interim results announcement.
“We expect this momentum to continue for the rest of the financial year along with a focus on extending selling channels, optimizing the mix between pre- and postpaid customers and expanding its RAN network to reduce roaming costs.”
Telkom shares were trading between R34.34 and R34.41 at the time of publication — around 3.8% lower than its closing price on Tuesday.
While the active mobile and mobile broadband subscriber segments showed growth over previous years, it appears that they are struggling to perform as desired, with the company reporting a decline in operating revenue for the period.
Telkom CEO Serame Taukobong attributed the revenue decline to increased competition and challenging economic conditions between April and September 2022.
Overall, Telkom’s operating revenue dropped by 0.7% from R21.29 billion in September 2021 to R21.15 billion in September 2022.
Its mobile revenue showed a similar decline from R8.85 billion to R8.78 billion, despite the operator’s active subscribers climbing 10.9% from 16.26 million to 18.02 million.
This is because the company’s average revenue per user dropped from R92.40 to R87.87 during the reporting period.
Telkom Mobile active subscribers — September 2012 to September 2022
While Telkom’s Mobile active subscribers have climbed during the reporting period, the rate of growth was significantly lower than in previous years, especially when compared to the period from September 2017 to September 2019.
Telkom Mobile broadband subscribers — September 2012 to September 2022
After Telkom Mobile broadband subscriber growth was flat between September 2021 and March 2022, the operator managed to increase its mobile broadband subscriber count to just over 11 million.
However, the increase is still significantly lower than in previous years.
Telkom Mobile capital expenditure
Telkom has shifted its capital expenditure (capex) strategy again, with the company cutting fiber capex in favor of increased investment in its mobile segment.
Group chief financial officer Dirk Reyneke told MyBroadband that this was to curtail increased roaming costs caused by higher levels of load-shedding.
Telkom has roaming agreements with Vodacom and MTN to provide coverage where its own mobile network does not reach.
Increased load-shedding causes many of Telkom’s own towers to go offline, pushing more subscribers to its roaming partners.
Overall, the company’s capex for the reporting period increased by 2.2% from R3.61 billion to R3.69 billion. However, it dropped its fiber capex by approximately 20% from R1.21 billion in September 2021 to R967 million in September 2022.
At the same time, Telkom increased its mobile capex by 31.4% from R1.45 billion in September 2021 to R1.91 billion in September 2022.
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