Telkom SA reassesses operation amid mixed results

Details: James Barton; Category: Operators; 25 November 2013; 10200 views

South African fixed-line provider Telkom is “continuing to explore all avenues to derisk [its] mobile business”, according to CEO Sipho Maseko.

The group’s newly-launched mobile operations have thus far incurred losses. Although it is the established fixed-line incumbent and has experience of the mobile market through its now-defunct partnership with Vodacom, Telkom as a solo operator is a newcomer to mobile in South Africa.

Telkom’s mobile offering is currently the country’s last-placed operator, trailing Cell C, Vodacom and MTN. The unit registered “negative mobile EBITDA” of ZAR773 million ($76.5 million) in the first half of the 2014 financial year, a drop of 8% on the previous year.

However, the operator did increase its mobile revenue by 55.4%, with mobile data revenue increasing 50% year-on-year. This was driven by growth in subscriber numbers, as well as promotional offers aimed at encouraging data usage.

Contract subscriber numbers fell along with postpaid ARPU, leading to a drop in operating revenue from mobile voice and subscriptions of 20.2%. The drop in subscribers was ascribed to “a large number of hybrid contracts [expiring] as well as the continuation of the debtors clean-up to ensure a better quality customer base”.

This may only be a temporary setback; Telkom noted that its hybrid contracts “were generating low ARPUs”, adding that its existing customer base is “providing a more sustainable growth base than the prior period”.

In addition, while the mobile unit’s Capex rose 56.4% in the first half of the year, this was due to infrastructure investment as “a result of the first half of the prior year being a repositioning period.”