The 2016 financial year would see JSE-listed Telkom stabilise its net revenue, maintain an earnings before interest, taxes, depreciation and amortisation (Ebitda) margin of between 26% and 27% and a capital expenditure (capex) to revenue ratio of 15% to 18% as its restructuring journey continued into the new financial year.

Speaking at the group’s 2015 financial year results presentation in Rosebank on Monday, Telkom Group CEO Sipho Maseko said the company was nearing the end of the first chapter of its turnaround programme, which saw the embattled group stabilise after a downward spiral in recent years.

“It has been a very difficult and tough journey over the past two years,” he said, adding that the telecommunications giant had “done pretty well” over the 12 months to March 31.

The balance sheet had been strengthened, cost interventions continued with operating costs decreasing by 5.2%, good cash management had been achieved with free cash flow of R3.9-billion and a low gearing ratio was maintained with very low net debt of R151-million – a 93% reduction on the prior year.

Telkom had also improved its capex efficiency with a capex to revenue ratio of 16.3% and 21% reduction in capex to R5.2-billion reported during the year ended March 31.

Telkom had derisked its mobile unit, which was now expected to break even by the end of the current financial year, after improving Ebitda by 49%.

This emerged as Maseko admitted that, in 2013, Telkom was “just about” ready to abandon its mobile unit, which had bled out millions of rands for years with no gains.

Now mobile data revenue had increased 50% to R988-million, with the number of active mobile subscribers increasing 21% to more than two-million.

The group’s fixed-line consumer unit had also gained some momentum, with residential digital subscriber line subscribers increasing 7.4% during the year under review, presenting a growth in fixed-line data revenues, which, in turn, increased the group’s net revenue by 12%.

Telkom’s business revenue slowed, with data connectivity revenues R81-million lower than 2014.

However, the business information technology (IT) services revenue increased 82% to R633-million, while converged solutions revenues increased 650% off a low base, managed data network services revenue increased 13.8% and metro-Ethernet revenues increased 39.8%.

Now Telkom was awaiting the outcome of the Competition Tribunal’s decision on the telecommunications giant’s takeover of Business Connexion (BCX), which was aimed at bolstering the group’s business offerings.

“We are pleased that the commission has recommended to the Competition Tribunal that the BCX transaction be approved with conditions,” Maseko commented, adding that a decision was imminent.

Turning to Telkom’s wholesale and networks unit, Maseko pointed to an ever-competitive environment plagued by declining revenue from leased-line facilities, an increase in the number of firms offering fibre products and Telkom’s wholesale unit prices plunging 63% across the product range in an effort to remain competitive.

However, good traction was being made with Telkom’s fibre-to-the-home projects and over one-million customers were connected to broadband as asymmetric digital subscriber line subscribers increased 7.9% during the year to March.

Meanwhile, Telkom would focus on the execution of the next stage of its turnaround strategy, which would elevate the firm from stable to commercially sustainable.

“To date, the turnaround has delivered results, but we will work to achieve greater efficiency and are reviewing our current operating model,” he commented.

A major part of the review would see the separation of Telkom’s business units into three standalone units – a consumer business focusing on home connectivity and services for customers; an enterprise business unit selling connectivity solutions to business customers; and an infrastructure wholesale business responsible for network deployment and efficiency and its associated IT, field services and operations.

“We believe the separation will remove complexities, allowing for faster solution delivery and encouraging the right business behaviours,” said Maseko.

It would enable greater accountability, clear decision-making and the leverage of infrastructure as the company faced another daunting year.

“We expect the challenging operating environment of the year under review to prevail in the year ahead, compounded by increasing competitive pressures and regulatory interventions.”

Maseko explained that “good cost discipline” would be maintained, along with a “careful and considered” approach to capex. The group would also “make good use of our strong balance sheet by taking advantage of any new opportunities for growth”.

“Bit by bit, the constraints will be removed,” he concluded.