Telkom’s mobile business is finally profitable (and sustainable). Since its launch in 2010 (as 8ta), its cumulative losses total R10bn. In those six financial years (to 31 March 2016), it generated R12,9bn in revenue (and incurred R23bn in expenses).

When you’re running your own network, mobile is a scale game. An MVNO, which piggybacks on another operator’s network, has an entirely different cost structure and it is possible to make money at a far lower scale. That’s why Mr Price Group, for example, has managed to book a profit for its MVNO of R113m in the six months to September 2016 on a subscriber base of just 106 000. And mrpmobile has barely been around for 24 months!

Amazingly, 8ta (largely) stuck to the original investment case described by then-CEO Reuben September in 2010. At that time, Telkom estimated “that the capital expenditure required to implement mobility will be a maximum of R6bn over five years”. To 31 March 2015 (including some of the original start-up investment prior to the fiscal in which it launched), it had invested R6,2bn in capex related to the mobile business.

But the business has taken longer than anticipated to break even (and start generating a profit). In fact, CEO Sipho Maseko has made de-risking the mobile business one of his main priorities since joining Telkom in 2013.

In 2014, it attempted a complicated network sharing and roaming transaction with MTN to achieve this.

Competition authorities would have none of it and the fact that Telkom has managed to get the business to profitability without it speaks volumes.

As at 30 September, Telkom’s mobile business had 3,2m active subscribers, of which nearly a million were on post-paid. The R214m in earnings (before interest, tax, depreciation and amortisation) reported for the six months is put in perspective by the R2,8m profit eked out by Cell C in the first half of this year, as well as the R13bn reported by Vodacom South Africa for the same period as Telkom.

Telkom’s performance in mobile data is particularly impressive. It’s now at the run-rate to be a R2bn-plus/year business and is already bigger than its Internet service provider division (Telkom Internet, not including digital subscriber line access).

Shareholders will be correct in asking whether this was all worth it.

Should Telkom have sold its 50% stake in Vodacom to begin with? Probably not, but that had been an unhappy arrangement for over a decade. Buying out Vodafone would have likely been preferable, but this probably would have been (correctly) blocked by competition authorities (and I’m not so sure the British would have been willing sellers). Plus, Telkom had its hands full with a number of very costly, dead-end forays into things it simply knew nothing about (Telkom Media, anyone?). By the time it decided to exit Vodacom and consider entering the market itself, it was (almost!) too late.

So, presuming the Vodacom sale was fait accompli, its only realistic option was to buy Cell C or to go it alone. We now know that Telkom had a formal look around Cell C (after a few informal approaches) and walked away last year, more than likely over price (and, again, Telkom moved too late).

Telkom simply didn’t have the luxury of not being in mobile. Shareholders may have been smiling as it generously paid out dividends, but they’d have woken up in five years to find not much of a business left. So, Telkom had to invest in a mobile business and pay the school fees. Its strength was always its core network. This enabled it to build a 3 000-strong base station network rapidly and comparatively cheaply.

Is roughly R8bn in capex (to 30 September) and R10bn in cumulative losses a fair price to pay? Study Cell C’s financials and I’ll argue 10 times out of 10 that this was cheap at the price.

To put the R10bn in perspective, this is approximately the official amount Telkom spent on its disastrous Multi-Links safari in Nigeria. At least here it has a handily profitable business to show for it and a physical mobile network!

And, given the effect of scale, one should expect margins to improve from this point given the high fixed cost nature of this game. Telkom has only three growth vectors: fibre, mobile and Business Connexion. Capital investment is being prioritised to the first two of those. By their own admission, executives realise that Telkom can afford to be bold in mobile. It could have continued being a me-too operator and bumbled along at 2-3% market share. It hasn’t and its disruptive FreeMe packages should be seen as just the start.