South African telecommunications group Telkom on Monday reported a 59,8% rise in headline earnings per share to 536,9 cents for the six months ended September 30, from 335,9 cents a year ago.
The group reported operating revenue of R21,52-billion from R20,036-billion a year earlier, while operating profit rose to R5,177-billion from R4,338-billion before.
No interim dividend was declared.
The group’s net debt to equity was reduced to 54,9% in the period.
CEO Sizwe Nxasana said: “Telkom continues to create value for all its stakeholders by delivering strong financial and operational results. This consistent performance has facilitated the repayment of a large portion of the group’s debt and enabled it to invest significantly in its people and its marketplace, while improving efficiencies and securing opportunities for future growth.
“Our strategy of customer-centricity, operational excellence and commitment to develop a sustainable marketplace has enabled us to compete effectively. We are confident of the relevance of this strategy in a more liberalised market and that Telkom is well positioned to continue delivering value,” he added.
Despite the high level of competitive pressure placed on the fixed-line business from the cellphone sector, Telkom managed to deliver a strong set of financial results.
Cash from operating activities of R5,595-billion facilitated the cash requirements for group capital expenditure of R2,075-billion, the repayment of R2,3-billion in net debt and the R1,688-billion repurchase of Telkom shares.
The group said R3,927-billion operating free cash was generated in the six-month period, on the same level of the prior-year six-month period, despite the higher cash taxes paid and increased capital expenditure. Net debt decreased by 27,3% to R12,424-million.
The fixed-line business posted modest growth in revenues, which was boosted by a strong adoption of data in consumer and small and medium business markets.
Significant progress was made in improving the competitiveness of the fixed-line segment through wide-ranging programmes to reduce costs, improve employee efficiency and entrench a culture of innovation across all operations.
Driven by customer demand, Telkom’s 50%-held subsidiary cellphone group Vodacom continued to entrench its market leadership in South Africa, and achieved a substantial increase in customers of 40,6% and a high level of gross connections for the six-month period of 3,5-million.
“We continued to make solid progress in extracting synergies between the fixed-line and mobile businesses by expanding our joint retail distribution and customer payment collections. As we move into a more liberalised marketplace, we believe greater synergies between the fixed and mobile businesses will be made possible.”
Total fixed-line traffic decreased by 3,2% as a result of the acceleration of broadband adoption and the resultant loss in internet dial-up minutes.
Going forward, Telkom said it will focus on greater customer centricity in core fixed-line markets and look for new growth in selected markets.
Specifically, it will look to accelerate the uptake of its range of internet, broadband and VPN offerings.
“We will continue to focus on growing our mobile customer bases and maintaining our market leadership position,” it said.
Telkom said there is no change to the current-year outlook. It believes its robust fixed-line data and mobile revenue growth will offset the voice volume pressure and low effective tariff increases.
“We aim to make an incremental improvement on our group Ebitda margin from the adjusted base of 38%, despite the higher than forecast levels of mobile competitive pressures. While both the mobile and fixed-line businesses focus capital spend on new technologies, we intend containing capital spend within a range of 12% to 15% of group revenue.
“We believe the group will continue to generate strong free cash flow. We are committed to growing our annual dividend and returning the remaining controllable cash to shareholders if we are within our targeted debt to equity ratio and there are no earnings accretive acquisitions that meet our strategic objectives and investment criteria,” the company said. — I-Net Bridge