Telkom Mobile bullish despite slowing revenue

The head of Telkom’s mobile business remains confident of the unit’s prospects despite growth slowing over the past year.

The state-run telecom group has enjoyed stellar performances in recent years, driven in part by the Covid pandemic that saw a surge in demand for communications and internet services.

In 2021 the group reported 34.5% growth in mobile revenue, driven by 27.8% increase in mobile subscribers, and saw it unseat Cell C as the country third-largest cellphone company.

That level of growth has slowed since the lifting of lockdowns and restrictions, but Lunga Siyo, CEO of Telkom’s consumer business that houses the mobile division, said the unit was still doing well and will continue to do so. 

“We’re at a mature stage. The same [Covid] growth rates, we won’t experience ... until there’s a new source of growth in the industry,” he said.

“Covid helped us to get there. To stay on the same revenue line post-Covid, it’s a task on its own. We’ve managed to do that and still actually grow better than the market from a customer acquisition point of view and also service revenue point of view,” Siyo added.

“So we’ve been beating the growth of the market itself, on mobile, quarter in quarter out if you look at the past four quarters. We still see that growth coming through.”

Telkom reported a 5.2% year-on-year increase in revenue from the mobile division to R5.4bn in its first quarter to end-June amid ongoing load-shedding, a stagnant economy and high inflation and interest rates that has cut consumers’ discretionary spending.

Mobile service revenue advanced 6.5%, and mobile data almost 10% in the review period as subscribers increased by 6.9% to 18.5-million and mobile data traffic jumped 25% to 329 petabytes.

Group sales rose 3.8% to R10.7bn, though group Ebitda declined 4.2% to R2.2bn, with the margin down 1.7 percentage points to 21.0%.

Group core earnings were lower due to greater operating costs and the decline in legacy revenues from older services such as fixed-lines and voice.

For the same period, rival Vodacom reported service revenue growth of 3.9% to R15.1bn in SA, boosted contract, fixed and financial services despite the rolling blackouts. But the number of local customers shrank 0.6% to 44.8-million.

Part of the strategy, Siyo said, is to move away from competing simply on customer or subscriber numbers. His goal is to retain customers and get them to buy and use more airtime, data and other products.

The focus is to increase the number of days that a subscriber remains active by offering deals on products such as data, which is paying off, he said. 

Mobile data accounts for the bulk of Telkom’s cellphone business with 11.7-million subscribers. In the review period, data revenue grew 9.9%. 

Mobile network operators have long reported and competed on the number of subscribers they command, but local developments  indicate this measure may need to be re-evaluated.

SA’s mobile industry is relatively mature. In a country with a population of about 60-million, the four biggest operators — Vodacom, MTN, Cell C and Telkom — have about 110-million “subscribers”, or active SIM cards between them. Many customers have more than SIM card for use on their phones, Wi-Fi modems, tablets and other devices.

One of the major criticisms of counting SIM cards is the different treatments of “active” and “inactive” SIMs by the operators.

One operator may regard a SIM card to be “inactive” if it is unused for 30 days, whereas another may have a 60-day inactivity threshold, and others have 90-day or 120-day thresholds.

gavazam@businesslive.co.za