Telkom's turnaround looks real - but is the growth sustainable? — A Telkom communications tower in Pretoria

Telkom released its interim results for the six-month period ending 30 September 2025 on Tuesday. On the surface, the headline number is exceptionally strong: the group’s headline earnings per share from continuing operations reached 305.6 cents, while group revenue rose to R22.1-billion.

For a company that has spent years in a difficult turnaround, this triple-digit growth feels like a vindication. But for seasoned investors, the very metric that makes the headlines may be exactly what deserves the least attention. The market seems to have already priced in much of this mechanical leap. The real test is not quantity, but quality.

Telkom’s story has clearly moved beyond the “turnaround” and “disposal” narratives of its 2025 financial year, which ended in March. The bigger questions now are about sustainability, margin strength and the true underlying health of its data-driven engine. The recent numbers released ask us to look through the shiny headline to the substance beneath.

The 115% Heps surge did not come from runaway operational growth. Much of it was a mathematical gift, driven by two key structural effects.

First, the prior comparative period (H1 of 2025) included significant once-off costs, a large derecognition loss related to the Telkom retirement fund and restructuring charges. Those non-recurring items depressed last year’s base, so their absence this year automatically lifts growth.

Second, Telkom’s deleveraging strategy made a meaningful impact. After selling Swiftnet (its masts and towers business) for billions, Telkom used a large portion of that capital to pay down R4.75-billion in debt. That repayment materially reduced its finance costs. In the results, we see the benefit in lower net finance charges, less risk and a more stable platform for future dividends.

These are not cosmetic gains. The balance-sheet repair is real, and it contributed significantly to the earnings beat. But while debt reduction and fewer one-offs are critical to Telkom’s health, they are not the same thing as accelerating core operations.

Mobile is key

With structural gains accounted for, the operational businesses provide a better picture of underlying health. Telkom’s mobile business remains central. Blended average revenue per user (Arpu) in Q1 was R75, while prepaid Arpu slipped to R58 as the business expanded into lower-income, non-metro regions. The results indicate that blended Arpu has largely retained or held around R75 based on market reporting, showing the company is maintaining profitable growth.

Openserve, Telkom’s fibre division, continues to be a core growth driver. In H1, Openserve’s revenue grew by 2.7% to R6.3-billion, with fibre-related revenue up 10.1%. The number of homes passed reached 1.5 million and the connectivity rate improved to 52%. This connectivity rate reflects both network reach and effective commercialisation. If it continues to grow while maintaining or increasing connectivity, Openserve strengthens its competitive moat. Conversely, any decline in pass-to-connect ratios or fibre revenue growth would raise immediate concerns.

Read: Why Telkom is winning in mobile

Margin management remains crucial. Telkom’s Q1 Ebitda margin was 25.9%, reflecting disciplined cost management. The half-year results confirm these gains were largely sustained. In a high-inflation environment, and with competitors like MTN and Vodacom, protecting margins is key. Analysts will also assess the impact of macro pressures such as load shedding and supply-chain issues on costs.

BCX remains a deeply personal and strategically important part of Telkom’s story. Having worked there, I know the pressures it faces in a tough enterprise and IT market. The interim results did not show a breakout turnaround for BCX, but they did indicate intentional progress. Telkom continues to shift the business mix towards higher-margin IT services, while focusing on cost optimisation and operational efficiency.

Even flat or modest revenue performance in this unit is significant, as it suggests that BCX’s transformation is real and not merely aspirational. Analysts and investors will pay close attention to management commentary on BCX’s strategic priorities, including scaling its cloud, analytics and fibre-based offerings. The trajectory of this subsidiary will be a key indicator of whether Telkom can successfully stabilise and grow its enterprise operations.

With the results now in hand, investors should therefore look beyond the headline Heps number. Key questions they should be asking are whether group revenue growth accelerated, Ebitda margins held or expanded, net finance charges fell as expected, mobile blended Arpu remained stable, Openserve connectivity stayed above 50% and management’s outlook conveys confidence.

Read: Telkom is sitting pretty

Telkom’s FY2025 was a year of celebration, a graduation. FY2026 is the year of proof. These H1 results, with a repaired balance sheet and strong data traction, provide reason for cautious optimism. Consistency going forward will determine whether the company has genuinely strengthened or whether the headline gains are temporary. – © 2025 NewsCentral Media