Mobile profits proving elusive for Telkom - TechCentral

Mobile profits proving elusive for Telkom


Mobile telecommunications helped offset pressures in other areas of Telkom’s business in the third quarter ended 31 December 2015, the company told investors on Monday in a trading and operational update. However, profitability in mobile will take longer to materialise than expected, it warned.

Active mobile subscribers grew by 22% year on year to 2,6m, delivering average revenue per user of R90,26. Post-paid subscribers grew by 45%, while prepaid subscribers increased by 15%. Mobile data revenue was a highlight of the quarter, albeit still off a relatively small base, climbing by 56% to R417m.

“Our mobile business continued to achieve good growth, with services revenue up by 37% and data revenue up by 56% year on year,” Telkom said.

“Our initial expectation that the mobile business would break even by March 2016 has been tempered by the operating environment and cost pressures. We are, however, confident that we will maintain the current positive revenue growth witnessed in this part of our business.”

In fixed lines, the picture is not as rosy. Fixed voice revenue declined by 5% year on year to R3,6bn, while broadband digital subscriber lines increased by a modest 3% to just over a million.

Fixed data revenue, excluding leased-line revenue, increased by 5%.

Group net revenue rose by by 7% to R7,2bn for the three months, though operating expenses (up by 13%) and capital expenditure (up by 22%) far outstripped growth at the top line.

Operating expenses were, however, up by only 2% when excluding IT services subsidiary Business Connexion (BCX). Without BCX, net revenue fell by 0,3%.

The numbers exclude voluntary early retirement and severance packages.

Telkom said the weak economy, the poor state of the rand, higher interest rates and rising inflation have created a “challenging” outlook.

“Against this backdrop, we prioritised our capital expenditure programme to focus on the growth areas of fibre and LTE,” it said.

“We expect continued weakness in the economy and anticipate that our customers will migrate to cheaper packages or delay spending on new infrastructure. We will partner with our customers to contain costs as well take up any opportunities presented by the current environment to grow our business.”  — © 2016 NewsCentral Media

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