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SA's third-biggest mobile operator, Telkom has a reported a double-digit fall in core profit in its third quarter to end-December, hit by higher costs as well as load shedding, but also weaker margins as it kept a focus on growing its mobile subscriber base.
Group revenue rose 2.3% to R11.03 billion to end-December, Telkom said on Tuesday, while earnings before interest, taxation, depreciation and amortisation (Ebitda) fell 13.5% to about R2.5 billion.
The group also warned of declining profitability for its fourth quarter, in part due to the costs of growing its mobile subscriber base, where the costs of handsets are up felt upfront.
Telkom said it had focused on "offering attractive value propositions" in its mobile business, with mobile data traffic up 25.6% and subscribers 12.9% to 18.6 million. Mobile broadband customers grew 9.9% to 11.5 million, comprising almost 62% of active mobile customers, while mobile revenue grew 7%.
"Our mobile and broadband strategies continued bearing fruit," said CEO Serame Taukobong. "We saw good growth in broadband as our data-led and connect-led strategies continued to drive growth in mobile and fibre subscribers along with data usage," he said.
The group also flagged the costs of load shedding, saying while its mobile sites are partially backed up through battery power, access network availability is materially reduced during load shedding Stage 4 and beyond.
This increased roaming costs, although the group said it had network availability of 99.99% during load shedding as it has resilient backup power, which consequently increased spend on diesel fuel to ensure network availability.
Telkom also said on Tuesday it remains focused on commercialising its masts and towers portfolio, that amounted to 3 960 towers at the end of the quarter, and is expecting to receive offers in March.
Shares in Telkom were up 4.04% to R35.52 in early trade on Tuesday, having now risen almost 12% in 2023.
Director and portfolio manager at Sentio Capital Imtiaz Suliman said the update was overall better than expected, with mobile revenue growth holding up in a "very competitive" environment characterised by load shedding.
"Openserve fibre connections were up 31% highlighting the strong demand for fibre solutions," he added. "The interest in Openserve is high and this is the gem in the stable."
On the negative side, fixed-line revenue continues to decline, although it was becoming less important to the group, said Suliman. Overall margins are under pressure, and Telkom would need to do more cost-cutting to offset the deterioration, he said.
