Release Date: November 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Telkom SA SOC Ltd (FRA:TZL1, Financial) reported a robust set of interim results, showing significant progress in their data-led strategy.
- The company achieved a notable improvement in their adjusted debt to EBITDA ratios, indicating a stronger balance sheet.
- Mobile data and fiber data revenues continue to drive growth, with mobile services growing by 10% and fiber-related services by 15%.
- The company successfully executed on its promise to exit non-core properties, contributing to financial efficiency.
- Telkom SA SOC Ltd (FRA:TZL1) maintained a positive free cash flow of ZAR768 million, showcasing effective financial management.
Negative Points
- The administrative process for the Swiftnet exit is delayed, awaiting ICASA's approval, which could impact future plans.
- Despite improvements, the company still faces challenges with legacy revenue streams, which are declining.
- There is ongoing restructuring within BCX, including a Section 189 process, indicating internal challenges.
- The company has not seen a significant increase in device sales despite market changes, which could impact revenue growth.
- Roaming costs, although reduced, remain a factor, and the company acknowledges it will never be completely roaming-free.
Q & A Highlights
Q: Can you provide an update on the capacity of the mobile network given the strong growth in mobile broadband subscribers? Also, there was a payment to Google of about ZAR1 billion. Is this a one-time payment or should it be expected to continue?
A: The key driver behind mobile growth is our spectrum and the fact that over 75% of our towers are on fiber. We will continue to invest in core capacity. The Google payment was a one-time payment, but we have a long-term arrangement with Google that involves back-to-back agreements.
Q: Are you expecting accelerating operational trends in the next few quarters, and how do you see the demand for consumer and IT services in South Africa?
A: We are maintaining a positive outlook and expect operational trends to continue positively. There is an increasing demand for consumer services, particularly in the SME segment, where we are focusing our efforts.
Q: How does the Competition Tribunal's decision to block the Vodacom and Maziv merger affect your pursuit of investors for Openserve?
A: The decision has no impact on our Openserve strategy. We have suspended discussions on partnerships for Openserve and remain focused on our InfraCo strategy, which is yielding positive results.
Q: What drove the substantial margin improvement in Mobile, and when do you expect top-line growth to accelerate?
A: The margin improvement in Mobile is due to a combination of revenue growth and cost efficiencies, including reduced roaming costs. We expect top-line growth to accelerate as next-generation revenue becomes a larger portion of our total revenue.
Q: Can you clarify if there will be any cash outflow from moving from a defined benefit to a defined contribution plan, and are there any more liability payments related to Google?
A: There is no cash impact on Telkom's free cash flow from the retirement fund transition. The Google transaction involves back-to-back contracts with both revenue and payment elements, but the initial payments were once-off.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
