Amidst a tough economic environment in South Africa, Telkom has reported a significant surge in profits for the fiscal year ending on March 31, 2024. The company attributes this success to its strategic focus on data services, which has driven a 6.8% increase in mobile service revenue, reaching R19 billion. This strategy has also helped Telkom surpass the milestone of 20 million mobile subscribers.
The company’s fibre division, Openserve, has made notable strides by achieving a 48.5% connectivity rate. Openserve has been concentrating on generating revenue from its fixed network, which has resulted in more than 1.2 million homes being equipped with fibre connectivity.
BCX, Telkom’s IT services arm, has seen growth in its revenue, while Swiftnet has expanded its infrastructure with a tower rollout program and has successfully increased its tenant base. These developments have collectively contributed to the revenue growth and profit margins of the entire Telkom group.
In an effort to bolster network reliability and expand its reach, Telkom has invested R6.1 billion. This investment has been allocated towards enhancing the mobile network, modernizing fixed network infrastructure, and improving the skills and capabilities required for managing ICT services.
Telkom has also taken significant steps towards enhancing shareholder value with the planned sale of Swiftnet for R6.75 billion, a move that received shareholder approval on May 24, 2024. The company expressed that this approval reflects shareholder confidence in the management’s ability to identify and pursue opportunities that will further increase shareholder value. Telkom will maintain the operations of Swiftnet until the sale receives regulatory approval.
The company’s financial health is further evidenced by a dramatic increase in headline earnings per share (HEPS) and basic earnings per share (BEPS), which soared by more than 100% to 376 and 385.5 cents, respectively. Telkom also turned around its financial performance from a loss in the previous year to a profit of R1.9 billion, a change attributed to the absence of one-time restructuring costs, reduced depreciation, and the impact of higher interest rates on net finance costs.
Looking ahead, Telkom is planning to reward its shareholders with cash returns after ensuring that it has adequately funded its capital expenditures and strengthened its balance sheet. The company is targeting the first year-end dividend payment for the fiscal year 2025.
The Board has approved a new dividend policy, which will be based on the availability of free cash flow, taking into account the need to maintain a robust balance sheet and future capital expenditure requirements. The policy suggests a dividend payout range of 30% to 40% of the free cash flow after accounting for capital investments. Dividends will be declared and paid annually, with the aim of achieving a dividend yield that is competitive with other local telecommunications companies.
| Financials | FY2023 restated | FY2024 | % Change |
| Group revenue (Rm) | 41 838 | 43 230 | +1.6% |
| EBITDA | 8 022 | 8 487 | +5.2% |
| HEPS (cents) | -35.5 | 376.0 | +201.3% |
| BEPS (cents) | -2 058.9 | 385.5 | +442.8% |
| Dividend | – | – | – |
Outlook
Telkom is strategizing to transform into an infrastructure-focused entity, referred to as InfraCo, by consolidating its assets and leveraging its collective capabilities under the unified banner of OneTelkom. The company’s vision for this transformation is to enhance the returns on its existing and prospective digital infrastructure investments. To achieve this, Telkom plans to proactively allocate capital expenditure to areas identified for growth, with the goal of boosting future operating profits, cash flows, and ultimately, the return on capital invested.
The planned sale of Swiftnet is a strategic move that aligns with Telkom’s shift towards emphasizing its growth in the digital infrastructure sector. This disposal is seen as a pivotal step in the company’s next stage of development, where it will focus on monetizing both its current and future digital infrastructure assets as an InfraCo.
Telkom’s approach involves a judicious investment strategy in its mobile and fibre network operations. The company aims to expand its information and communications technology (ICT) capabilities, which will be underpinned by data centres—both owned and partnered. These data centres will serve as a foundation for Telkom to enhance its IT managed services offerings.
Additionally, Telkom anticipates that the imminent deployment of 5G technology, along with the necessary equipment upgrades by Mobile Network Operators (MNOs), will drive demand for fibre connectivity. This is particularly relevant as MNOs aim to transition customers from older 2G and 3G networks to more advanced 4G and 5G technologies by the end of 2027. This technological shift is expected to stimulate the expansion of fibre networks to support not only towers but also the infrastructure required for 5G small cell sites.
