Fixed lines were again the weakest link in Telkom’s annual financial results. For the year ended 31 March 2014, fixed-line data revenue went into reverse for the first time, recording a decline of 1,1%, while fixed voice and interconnection revenue fell by 7,4%.
The company still managed an increase of 6,5% in the number of broadband ADSL users to just over 925 000.
Calling plan subscribers increased by 1,3% to 867 874.
However, the number of fixed lines in service continued its long decline, falling by a further 4,8% in 2014 to just over 3,6m, from 3,8m a year ago. The fixed-line penetration rate has fallen to 7%, from 7,3% previously.
The decline in fixed-line voice is due to a 2,1% decline in voice minutes, resulting from fixed-to-mobile substitution, with a decrease of approximately R190m relating to the pass-through of reduced mobile termination rates to fixed-line customers, the company says.
The number of business lines decreased due to consolidation of branches and brands as well as the trend of medium-sized businesses to reduce the number of services to save costs, including the move from standalone offices into multi-tenant office parks.
Fixed-line subscription revenue grew by 0,9% to R7,8bn as a result of average line rental tariff increases of 6%.
Group operating revenue was up by 1,1% to R32,5bn, driven by a strong performance by mobile, where revenue increased by 72,7% to R2,3bn. Mobile data revenue increased by 80,2% to R656m as the number of base stations in operation grew by 22,3% to 2 428, 1 183 of which are 4G/LTE.
Active mobile subscribers increased by 17,6% to 1,m, with a blended monthly average revenue per user of R62,79.
Headline earnings per share excluding once-off items increased by 35,1% to 388c on the back of cost cutting.
Operating expenses, excluding depreciation, decreased by 2,1% to R18,2bn, while free cash flow generated was R1,1bn. Interest-bearing debt decreased by a healthy 38,5% to R4,1bn.
Telkom CEO Sipho Maseko says efforts to turn Telkom around are “starting to produce results”.
“In the past financial year, in line with our guidance to stabilise revenues, we have achieved revenue growth of 1,1% for the year, confirming that we still face significant challenges largely as a result of the sustained pressure on our fixed-line revenues,” he says.
Telkom’s board has decided not to declare a dividend for the 2014 financial year, but may reinstate one in 2015, Maseko says.
However, this will be “subject to the financial performance of the Group, the operating environment, growth opportunities and debt and cash flow levels”.
There is expected to be continued pressure on fixed-line voice revenues, intensified by strong competition, a challenging macro-economic environment and effects of regulatory interventions, Maseko adds. “Our objective to further stabilise and grow revenue is dependent on effectively positioning our resources to drive value and achieving efficiencies across our operating cost base to improve Ebitda margins.”
Ebitda refers to earnings before interest, tax, depreciation and amortisation.
“This will require us to focus our capital expenditure on areas that generate satisfactory returns for our shareholders, and to avoid unprofitable operations.”
The company says it is continuing with negotiations with MTN, first announced in March, about an expansion of the companies’ existing roaming agreement to include bilateral roaming and the outsourcing of the operation of Telkom’s radio access network.
Telkom announced on Thursday that it had agreed to suspend talks to acquire Business Connexion for a period of mourning following the untimely death on Wednesday of the IT services company’s CEO, Benjamin Mophatlane. – © 2014 NewsCentral Media
