Shares in Telkom fell almost a tenth on Tuesday as the group’s IT services unit, BCX, disappointed, dragging down an otherwise strong quarterly performance.
Overall, Telkom reported a stronger financial performance for the first quarter as the group focused more on mobile data and fibre-based services.
Revenue in these segments grew by 9.6% and 11.3%, respectively, in the three months to end-June, providing some positive feedback for the group’s data-led strategy.
“It is the performance of data revenue that gives us confidence that we are heading in the right direction to achieve our new medium-term guidance of mid-single digit growth,” said Telkom CEO Serame Taukobong.
As part of its growth strategy, Telkom has focused on growing the revenue contributions of mobile data and fibre-based services, while disposing of noncore assets.
Last year, the company disposed of its masts and towers business, Swiftnet, for R6.6bn. The cash injection continues to benefit the group’s balance sheet, with R4.75bn worth of debt being settled since the previous year-end.
Taukobong said the remainder of the proceeds from the sale had been retained to “maintain financial flexibility for growth opportunities”. Some of the proceeds were also used to return value to shareholders.
On July 14, the company reinstated its ordinary dividend after a four-year suspension and declared a special dividend using R500m in cash proceeds from the disposal of Swiftnet.
In line with its data-led growth strategy, overall data revenue represented nearly 60% of Telkom’s revenue by end-June. The company’s mobile service revenue rose 7.8% in the three months ended June as mobile data subscribers soared 27.5% year on year.
The firm reported a 6.5% uptick in earnings before interest, tax, depreciation and amortisation (ebitda) as group revenue edged up 1.1%. Some cost optimisation programmes also helped expand Telkom’s ebitda margin by 1.4 percentage points to 25.9%.
The group’s liquidity was also supported by a R158m injection from property sales, which closed in the previous financial year, with R121m more in cash expected to come through this year.
The gains were offset by a “disappointing” performance for Telkom’s BCX subsidiary, in which revenue declined 8.3% year on year. The group said it reflected a transaction in the business.
In the IT business, the group said the reduction of exposure in hardware and software sales, which declined 9.8%, was aligned with its shift to “scalable, service-based revenue”. Despite IT services revenue decreasing 3.1%, “we are gaining share in high-value segments”.
Ebitda for the unit was down 25.3%, primarily due to the fall in revenue.
The drop in ebitda margin for BCX from 8% to 6.5%, was partially offset by cost cuts that resulted in an 11.9% operational expenditure reduction.
The group said that a specialised team was in place to bring about a faster turnaround for its ICT subsidiary.
Reflecting on the promising first quarter, Taukobong was confident that the group’s momentum would continue throughout this financial year.
“We are on track with our data-led journey to deliver sustained performance, actively shaping Telkom to improve returns while preserving our core strengths,” he said.
Shares in Telkom fell 9.15% to R53.50 on Tuesday, giving the telecom group a R26.89bn market cap. So far in 2025, the share is up 53%.
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