Telkom was the only JSE-listed telecom operator to end 2024 with a share price better than where it started.
Up 14% for the year, it fared much better than Vodacom, down 2.2%, and MTN, down 18.1%. Blue Label Telecoms, though not technically a telecom operator yet, did well in 2024, with shares in Cell C’s largest shareholder up 47% for the year.
Through 2024, fortunes for the state-affiliated Telkom seemed to improve, albeit after the share price took something of a battering during the Covid-19 years.
In 2025, investors will be hoping the group can maintain a trajectory that resulted in interim profit jumping 10% for the six months to end-September as its cost optimisation initiatives started to yield results.
It certainly helped that it delivered on some of its promises, such as completing the R6.7bn sale of its masts and towers business, Swiftnet.
In December, local regulator the Independent Communications Authority of SA (Icasa) gave Telkom the green light to dispose of the unit.
The transaction, announced in April, involves the sale of Swiftnet to a consortium consisting of an infrastructure fund managed by a subsidiary of Actis and an infrastructure vehicle owned by Royal Bafokeng Holdings.
Investors will also be happy that the ratio of debt to earnings has come down.
Telkom CEO Serame Taukobong recently told Business Day that while at “its worst” Telkom had a 1.9 times debt to ebitda (earnings before interest, tax, depreciation and amortisation) ratio, which has come down to 1.3 times.
Taukobong has also promised to cut back on capital expenditure — choosing to spend less than rivals — particularly in the area of fibre where Telkom has invested heavily, making it the leader of the local telecom pack with 170,000km installed.
Telkom has positioned itself as an infrastructure company, providing capability to its own operations, while serving the wider industry with connectivity, particularly through fibre.
The group’s investment case is being helped by its focus on SA. Sector rivals MTN and Vodacom are feeling some pressure — albeit in the short term — due to their presence in the rest of Africa.
By now, news of the devastation caused to businesses and consumers alike by the Nigerian naira’s more than 90% plunge since mid-2023, has spread far and wide. Since then, MTN has borne the brunt of the weaker currency while facing inflation and other headwinds across its other markets.
The group dipped into the red at the halfway stage of its financial year, the first time the telecom major has reported a loss since 2016, as the further devaluation of the naira and conflict in Sudan weighed on results.
Vodacom, traditionally the safe investor bet for the sector, has become exposed to some of the same volatility as MTN since taking over Vodafone’s operations in Egypt. The Egyptian pound has lost about 40% against the dollar over the past year, which has taken a toll on Vodacom’s earnings.
In November, Telkom reported an almost 10% jump in profit at the halfway stage as its cost optimisation initiatives started to yield results.
Profit for the six months to end-September was up 9.7% to R1.07bn, but on an adjusted basis profit was 67.9% higher at R1.64bn. Adjusted financial measures exclude the R160m restructuring cost and the Telkom Retirement Fund derecognition loss of R618m.
Group revenue for continuing operations was up 1.9% to R21.4bn, with mobile service revenue increasing 10% and fibre data service revenue rising 15.5%.
Adjusted ebitda were up 18.3% to R5.6bn, demonstrating improved operating leverage, it said.
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