The profit of ICT services and telecom company Telkom more than halved in its latest half-year results as it saw a drop in fixed, mobile and IT services revenue and consumers migrated to new technologies such as fibre and LTE.
The company, valued at R18.3bn on the JSE, reported on Wednesday in its results end-September that profit fell 52.9% year on year to R641m and headline earnings per share (HEPS), a profit measure that strips out impairments and one-off items, fell 51.9% to 137.2c.
Revenue dipped 0.7% to R21.15bn, because of a drop in fixed, mobile and IT service revenue amid strained economic conditions.
High inflation, interest rate hikes, advanced levels of unemployment, among other factors, have put consumers under pressure and weighed on consumer spending.
A decline in its legacy fixed business as customers migrated to new technologies such as fibre and LTE worsened the problem, but higher mobile handset, IT hardware and software sales partly offset the impact.
“However, a pricing and margin gap remains between the new business and legacy businesses. The accelerated decline during the period in legacy fixed business limited overall performance,” Telkom said.
Core earnings decreased by 17.3% to R4.94bn and its core earnings margin contracted 4.7 percentage points (pp) to 23.4%, because of a decline in legacy revenues and pressure on its cost base.
“Direct costs increased, driven by materially higher handset and equipment costs,” the company said. “While the rest of the operating costs were well-managed, energy costs increased significantly due to the sustained load-shedding during the period. This resulted in an increased cost base.”
This was partly the reason services fees rose more than one-fifth as the diesel prices rose and higher advisory fees were incurred largely for mergers and acquisition-related transactions and strategic projects.
The latest results makes for sombre reading months after a tug-of-war between MTN and Rain over Telkom, but MTN has since withdrawn its offer, leaving Rain as the only potential suitor.
Telkom continues to invest in fibre and mobile as new areas of growth.
“We expect modernisation to continue over the next year, coupled with the deployment of new base station sites as the [mobile network operators (MNOs)] deploy their respective newly acquired permanent spectrum allocations,” group CEO Serame Taukobong said.
The number of fixed broadband subscribers declined 0.1% to 562,080, mobile broadband subscribers rose 3.7% to 11.03-million, active mobile subscribers jumped more than one-tenth to 18.02-million and fibre homes passed and connected advanced more than one-third to 443,469.
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