Telkom Shows Resilience Amid Challenging Conditions: Q1 FY2024 Highlights

Telkom, South Africa’s leading telecommunications company, reported a 3.8% increase in Group revenue, reaching R10,668 million in the first quarter of the fiscal year 2024 (Q1 FY2024). The growth was primarily fueled by the strong performance of its new generation network (NGN) offerings, which saw an uptick in data traffic and significant growth in active subscribers in both the mobile and fiber businesses. Mobile service revenue soared by 6.5%, with mobile data revenue showing a robust increase of 9.9%.

Telkom Mobile experienced remarkable growth, with mobile data traffic and subscribers surging by 25.1% and 6.9% year-on-year (y-o-y), respectively, reaching 329 petabytes and 18.5 million subscribers. The number of mobile broadband customers rose by 8.9% to 11.7 million, constituting 63.2% of all active mobile customers.

Telkom has started the 2024 financial year with good momentum. Group performance was pleasing in the face of rolling power outages (load shedding), muted economic growth, continuing inflationary pressures on consumers and an intensely competitive landscape. Our value-driven and data-led strategy paid off as NGN revenues grew. Our subscriber bases continued to grow and with increased demand for connectivity we saw strong double-digit growth in data consumption – a testament of our continued value propositions from both our Mobile and Fibre businesses. Mobile data revenue grew 9.9% driving exciting mobile service revenue growth, while fixed data NGN revenue growth in our fibre business advanced 10.6% contributing to Openserve’s leadership in providing open access connectivity across South Africa. Demand for IT hardware and software at BCX was healthy as the fulfilment of orders improved along with new orders. Performance was however impacted by legacy and fixed voice revenue declines caused by ongoing migration to NGN technologies across our businesses, as anticipated.

Serame Taukobong, Group Chief Executive Officer, Telkom

In the fixed data segment, Openserve sustained its strong growth in new generation revenue, growing by 10.6%. Fixed data traffic escalated by 13.3%, reaching 512 petabytes, while the number of homes connected to fiber increased by 24.2%, resulting in an impressive FTTH connectivity rate of 46.5%.

Business Connexion (BCX) contributed to Telkom’s overall revenue growth, with its IT business revenue rising by 17.5% to R2,068 million. Swiftnet also performed well, showing a 1.2% revenue increase and maintaining a healthy EBITDA margin of 71.8%.

Despite the positive revenue growth, Telkom’s Q1 FY2024 EBITDA declined by 4.2%, leading to a 1.7 percentage point contraction in the EBITDA margin (21.0%). The decline was mainly attributed to the impact of reduced legacy revenues, higher direct and operating costs, and an increase in provisions for bad debts due to the challenging macro-economic environment.

Load shedding remains a significant challenge in South Africa, impacting Telkom’s operations and profitability. To mitigate the impact, the company is investing in improving the resilience of its mobile and fiber networks and reducing diesel consumption through the adoption of lithium batteries and solar power installations.

Despite the economic challenges and power supply issues, Telkom continues to demonstrate its commitment to growth and innovation in the telecommunications sector.