Telkom Surprising Highs and Devastating Lows

Telkom has released its interim financial results for the last six months, and as expected, it has suffered a plummet in fixed-line subscriptions. Fortunately for the company, there's a silver lining.
Jason Snyman
2018-11-14

There’s a widespread sentiment in the world of comedy that a comedian’s jokes should always punch up, and never down. In other words, it’s okay to make fun of blatant criminals, people in positions of power, moronic companies and general pompousness, but it’s inexcusable to crack jokes at the expense of those in actual suffering.

This is how we’ve come to feel about Telkom. It used to be fun to take jabs at the abysmal customer service, incompetent billing department and, well, the barely-there Telkom ADSL, where do we begin? But we can’t anymore. It’s just too sad. It’s so completely sad, the ineptitude so profound, that Telkom has almost become a parody of itself.

It wasn’t too long ago that Telkom even mistakenly agreed that it is the worst internet provider ever.
 

Anyway, Telkom has released its interim results for the six months ended 30 September 2018, and from a fixed-line perspective, it’s a doozy. As expected, the company has suffered an unremitting plummet in fixed-line subscriptions. The results show a 9.6% year-on-year decline in fixed access lines, dropping from 2.84 million in September 2017 to 2.56 million in September 2018.

The results also reveal that Telkom fixed broadband subscribers, which includes both fibre and DSL lines, are down by 2.5% to just 974 181.

Fortunately enough, the telecommunications behemoth has also enjoyed some (very surprising) successes, and we’re going to focus on that. Let’s take a look.
 

Telkom Mobile Is Making Up For The Losses

Though fixed service revenue is down, dropping 7% to R10.7 billion, mobile service revenue is up by 53.8% to R3.5 billion, underpinned by Telkom’s capital investment in the wireless network, extension of distribution channels, increased store footprint, and innovative data-led products.

The financial results also revealed that its group operating revenue is up by 5.2% to R20.8 billion.

Commenting on the company’s performance, Telkom group CEO, Sipho Maseko, said that the company had delivered satisfactory performance, despite a challenging operating environment.
 

The mobile business was a growth driver with an impressive service revenue growth of 53.8% to R3.6 billion supported by strong customer growth of 50% to 6.5 million, with a blended average revenue per user of R104, as our affordable data-led products and broadband product propositions continue to resonate well with our customers,” said Maseko. “The accelerated performance was underpinned by increased capital expenditure and increased store footprint.

So, despite the decline in fixed-line subscribers, new revenue streams are compensating for the loss, albeit at a lower margin.
 

Mobile and fibre remain key capex (capital expenditure) focus areas with impressive returns in mobile service revenue,” said Maseko. “Our fibre to the home connectivity rate has improved to 35.6%, when compared to 24.5% in the prior year.

The results included the following:

  • Mobile broadband subscribers were up 66.8% to 4,751,688;
  • Active mobile subscribers were up 50.0% to 6,545,101;
  • Pre-paid subscribers were up 60.7% to 4,877,613;
  • Post-paid subscribers were up by 25.4% to 1,667,488. 

A New Deal With Netflix

Telkom also recently confirmed that it had secured a partnership with streaming giant, Netlfix, which has taken South Africa by storm. This is Netflix’s first agreement with any South African telecommunications company.

Telkom content executive, Wanda Mkhize, said:
 

We are excited to expand our content offering with Netflix. The Netflix partnership allows us to offer more entertainment. As a start, we can respond to customer requests for the inclusion of Netflix on Telkom’s LIT TV Box

Mkhize confirmed that Netflix will be available on the LIT TV Box later this year, and that two teams are working on exciting mobile and broadband service offerings to be launched before the end of the year. These will include enhanced LIT video options and data offerings.