Telecommunications group Telkom’s mobile subscriber base is nearing the 20-million mark, amid increased next generation (NGN) product uptake.

In the trading update for the quarter ended December 31, 2023, Telkom reported that its mobile subscribers increased 6.4% to 19.7-million, while its mobile broadband subscribers grew by 10.9% to 12.7-million, accounting for 64.6% of the total mobile subscriber base.

Overall, Telkom made good progress in the third quarter of the 2024 financial year, Telkom Group CEO Serame Taukobong commented.

Group earnings before interest, taxes, depreciation and amortisation (Ebitda) remained stable at R2.48-billion, despite the impact of continuing inflationary pressures on retail consumers and enterprises against a backdrop of muted economic growth in South Africa.

While Ebitda was supported by revenue growth and cost reductions from the organisational restructuring in the first quarter of 2024, Telkom’s decreased Ebitda margin, at 21.9%, was impacted by product mix at BCX, higher expected credit losses on trade receivables as retail and enterprise customers remained under pressure from the weak macroeconomic environment, as well as loadshedding-related costs.

“Telkom Consumer and Openserve made impressive progress and advanced operating earnings by 20.6% and 7% respectively,” he added.

During the third quarter of the year, group revenue increased 2% to R11.3-billion, driven by compelling data-connectivity propositions from its mobile and fixed networks, higher recharges by prepaid mobile subscribers, the ongoing rollout of fibre network to homes and enterprises by Openserve and Swiftnet's commercialisation of the masts and towers portfolio.

“Enterprises' demand for hardware and software remained healthy and grew in double digits at BCX, but overall revenues were impacted by the continued decline in traditional voice and data revenue, as customers migrate to NGN products,” he said.

Telkom Consumer Ebitda increased by 20.6% to R983-million, driven by revenue expansion and a judicious commitment to cost containment, while mobile Ebitda increased 3.5% to R1.2-billion.

The unit also achieved an overall 2.5% expansion in revenue, reaching R6.88-billion, mostly owing to the performance of the mobile business and the strategic expansion of its fibre services.

Mobile revenue increased 4.8% to R5.96-billion, while mobile data revenue grew 11.5% to R3.69-billion as mobile data traffic increased 19.7% to 370 petabytes.

“This increase stems primarily from our commitment to innovative and compelling value propositions, thereby effectively stimulating data consumption. The significant contributor was mobile service revenue, which experienced a 7.1% growth to R4.93-billion,” said Taukobong

Openserve reported Ebitda growth of 7% to R1 014-million, with fixed-data next generation revenue growth of 6.2%, underpinned by 12.5% growth in enterprise services, 10% growth in broadband services and 1.7% growth in carrier services.

The number of homes passed with fibre increased 16% to 1.19-million homes, while fibre-to-the-home (FTTH) connections increased 20.8%, to 567 350 homes, with fixed-data traffic up 24.4% to 612 petabytes.

“The continued uptake of our NGN products by retail and enterprise customers, along with double-digit increases in data consumption, bode well for the group NGN revenue, which grew by 5.1% offsetting traditional revenue declines,” he continued, noting that NGN revenues advanced by R440-million, while traditional revenues retracted R219-million, leading to group revenue growth of R221-million for the quarter.

Meanwhile, during the quarter under review, BCX revenue decreased 0.7% to R3.48-billion, amid a decline in Converged Communications offset by growth in Information Technology (IT).

Revenue from the IT business grew 13.1% to R2.12-billion largely driven by a 34.2% increase in software and hardware business, while revenue from the Converged Communications business declined by 16.4% to R1.36-billion, impacted by declines in traditional fixed-voice and data, owing to ongoing migrations to next generation products and churn of subscriptions.

Data connectivity revenue reached an inflection point, with 78.2% of revenue comprising of next generation revenue.

Ebitda declined by 27% to R322-million owing to the impact of higher revenue growth from low-margin hardware and software business, the converged communications legacy declines, as well as higher impairments of receivables owing to slow collections, particularly in the public sector. These were partially offset by cost reductions emanating from the staff restructuring initiative, as well as cost containment efforts in the business.

Swiftnet, which continued to commercialise and expand, reported a 4.7% increase in revenue to R333-million owing to additional tenancies in the masts and towers portfolio.

The unit’s tower build programme remained steadily on track with nine towers and four in-building solutions sites being constructed during the quarter.

Total Ebitda increased by 11.3% to R246-million, owing to the optimisation of tower operating costs.

Telkom, on Monday, also reported that its potential sale of Swiftnet, as part of its value unlock strategy, continued.

“Significant progress has been made on meeting the remaining agreed milestones under the exclusivity arrangement including that the parties have significantly progressed their negotiations to agree transaction agreements,” Taukobong said.

The multi-party disposal process started in late 2022 following the board's approval to affirm and realise the value of Swiftnet through an outright disposal of the masts and towers business to enhance shareholder value and focus on core business competencies.

By August 2023, two bidders were selected to progress with negotiations, following which Telkom entered an exclusivity period with a preferred bidder.