Telkom’s spending on its mobile network has skyrocketed — with capital expenditure well above guidance — as it invests big money to ensure its network can keep pace with rapidly growing demand for its mobile services.
The company said on Tuesday that in the six months to 30 September 2019, mobile revenue leaped 56.6% year on year to R5.6-billion, supported by a “significant increase in the customer base”. Telkom had 11.5 million mobile subscribers at the end of the period, an increase of 75.7% on a year ago.
It said its mobile business “remains the fastest growing business in the market with market share gains underpinned by our affordable broadband-led propositions, which resonate with our customers”.
In the six-month period, Telkom invested R4.2-billion on capital projects, with its capex to revenue ratio rising sharply to 19.7%. Most of the money went into its mobile and fibre networks.
“More than 50% of the capital investment was in the mobile business, increasing by 66.1% to R2.2-billion when compared to the prior period, to support growth in the mobile business and to prepare for the accelerated upgrade of customers to LTE and fibre,” it said.
In the latest reporting period, Telkom grew its footprint of base stations by 24.9% to 5 476 and implemented a new roaming agreement with Vodacom.
The accelerated investment is bad news for shareholders, at least in the short term, as Telkom has warned it is likely to affect the company’s dividend policy.
“Our capital investment strategy has enabled us to compete effectively, deliver current growth levels and broadband leadership. We intend to continue the strategic roll-out of our network,” it said. “Given our increasing capital requirements, we will rigorously implement the capital allocation framework, which will prioritise our capital investment programme to ensure the long-term sustainability of our business.”
This is “likely” to impact the dividend policy. “In considering the dividend policy, we will prioritise our capital investment programme, maintain an investment-grade credit rating and consider our cash position. Long-term shareholder value remains a key priority in our capital allocation framework and we aim to deliver improved total shareholder return.” — © 2019 NewsCentral Media