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    Innovation Village | Technology, Product Reviews, Business
    You are at:Home»Africa»Telkom wallows in serious financial debt
    Telkom

    Telkom wallows in serious financial debt

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    By Tapiwa Matthew Mutisi on June 16, 2023 Africa, Business, Financial report, News, Telecoms

    It never rains but pours for Telkom, as it wallows in deep financial trouble. Its net debt increased by 19.3%, free cash flow declined by 30.9%, and net debt to EBITDA increased from 1.2 to 1.8. In a recent internal memo, Telkom CFO Dirk Reyneke also warned staff that the company was burning through cash at an “unsustainable rate”.

    Telkom released its financial results for the year ended 31 March 2023, which revealed a company struggling to make ends meet. Though it tried to put on a brave face, saying it “showed resilience amid tough trading conditions” in a press statement.

    It highlighted that revenue was up 0.9% to R43.138 billion, mobile customers increased by 7.8% to 18.3 million subscribers, and mobile service revenue grew by 1.8%. However, delving deeper into the results document revealed that the company has numerous challenges, including rising debt and plummeting cash flow.

    Apart from Telkom’s mobile and fiber divisions, there was a sea of red in the operators’ latest financial results. Its Internet subscribers declined by 20%, fixed access lines declined by 21%, and fixed-line voice traffic is down 18%.

    Telkom’s legacy copper business is essentially dead, which prompted an impairment of R13.017 billion on Openserve and Telkom Consumer. Even ignoring the tremendous impairment, Telkom struggles financially with flat revenue and rapidly increasing costs. This is clearly illustrated in its free cash flow and net debt.

    Telkom’s free cash flow weakened to negative R2.722 billion from negative R2.080 billion the year before. It was mainly a result of a 45.0% decrease in cash generated from operations, impacted by the R3.218 billion decline in profit before tax compared to the prior year.

    Telkom’s poor operational performance also impacted its borrowings. Net debt increased by 19.3% from R14.067 billion to R16.777 billion. The increased debt resulted in Telkom’s net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio increasing from 1.2 to 1.8 times.

    To put this in perspective, in 2015, Telkom’s net debt was only R123 million, with a net debt to EBITDA ratio of 0.02. It rapidly increased over the next eight years to where it is today.

    The charts below show how Telkom’s net debt and net debt to EBITDA ratio increased over the last eight years.

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    Africa Business Dirk Reyneke EBITDA Financial Debt Financial Report South Africa Technology Telecommunication Telkom
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    Tapiwa Matthew Mutisi
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    Tapiwa Matthew Mutisi has been covering blockchain technology, intelligent technologies, cryptocurrency, cybersecurity, telecommunications technology, sustainability, autonomous vehicles, and other topics for Innovation Village since 2017. In the years since, he has published over 4,000 articles — a mix of breaking news, reviews, helpful how-tos, industry analysis, and more. | Open DM on Twitter @TapiwaMutisi

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