Telkom sees signs of pressure for SA’s consumers even as revenue picks up

SA’s third-largest mobile operator, Telkom, says it has returned to revenue growth in its first quarter to end-June, but there are signs customers are under strain, including many opting to switch to prepaid options.

Telkom said revenue grew 3.5% to R10.6bn to end-June, boosted by its mobile business, but the  prepaid market remains the driver of new connections, with customer numbers growing by 46.8% to 13.5-million.

Telkom said there was a reluctance among some customers to renew postpaid contracts, with some opting to switch from postpaid to prepaid propositions, while some parts of its business were grappling with flagging investment rates in an economy that is enduring a third Covid-19 wave, with many small businesses having to close their doors.

Mobile service revenue grew 13% to R4.44bn, supported by 36.3% year-on-year growth in active customers to 16.1-million.

Mobile data revenue grew 11.1% supported and mobile broadband customers up 30.9% to 10.5-million, representing 65.6% of active customers

Telkom has been focusing on its mobile business as technological changes put pressure on its traditional fixed-line services, and this paid off in 2020, when the Covid-19 pandemic boosted demand for data as people started working from home.

Although the fixed business declined 5.6% to R3.84bn in the period, Telkom said it saw a significant slowdown in the rate of decline. Fixed voice revenue declined 13.6% year on year, which compares favourably to the 33.5% decline reported in the prior year.

Telkom said its IT business was hardest hit by the challenging environment, with revenue down 11.8% to R1.8bn due to delayed investment from customers, though it added it saw no significant churn in its existing base. Domestic fixed-line 

“Telkom published a solid set of results for the first quarter of the year in a challenging trading and economic environment,” CEO Sipho Maseko said in a statement.

“Despite the SA economy gradually opening, customers remain under severe financial pressure due to loss of jobs, reduced income and liquidation of small businesses,” he said.

Core profit growth of 7.3% outpaced that of revenue, which Maseko attributed to the group’s cost-containment efforts, and the rise was in spite of an average 6% salary increase across the group.

In afternoon trade, Telkom’s shares were up 1.74% to R42.59, on track for their best day in almost a month. Telkom’s shares have more than a fifth since the beginning of 2020, while MTN has risen over a third and Vodacom 17%.

Update: August 4 2021
This article has been updated with share price information.

gernetzkyk@businesslive.co.za