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Monday, May 28, 2018

Telkom declares falling profit drags dividend down, while expanding into Mobile & Info Tech

"Telkom managed to offset a decline in revenue from its traditional fixed-line telephone business by expanding into mobile and information technology".
Telkom CEO Sipho Maseko addresses the media. Picture:BusinessLive

But its profitability suffered, translating into a 16% lower dividend for its shareholders for the year to end-March.

Telkom declared a final dividend of R2.37, taking the total to R3.55, a 16% drop from the prior year’s R4.22.

Operating profit dropped 6.5% but a hefty tax bill meant after-tax profit fell 19.2% to R3.2bn.
The former state-owned phone monopoly’s results, released on Monday morning, showed 60% of its revenue still comes from its fixed-line network.

A 29% surge in Telkom’s mobile revenue managed to compensate for declines from its fixed-line business, along with revenue declines from its information technology business, BCX, and "other", which includes Yellow Pages, Gyro and VS Gaming.
Telkom managed to grow its overall revenue by 0.1% to R41bn.
Its fixed-line revenue declined 4% to R24.7bn, revenue from its information technology division fell 7% to R7bn and "other" revenue fell 4% to R1.5bn.
Its star performer was mobile, which grew revenue by 29% to R7.8bn, taking its contribution to 19% of the group’s total revenue.

Telkom segments itself into three brands: Openserve, which it describes as a "wholesale infrastructure connectivity provider with the largest open-access network across SA"; Telkom Consumer, which is pitched as SA’s "largest fixed-broadband provider, internet service provider and, together with its mobile network, a converged communications provider"; and information technology group BCX, which it acquired in 2015 for R2.7bn.
"Despite the price reductions and ongoing voice revenue pressures, Openserve’s overall revenue declined by only 2.9% while data traffic grew massively in the network," CEO Sipho Maseko said in the results statement.

Telkom’s traditional telephone business is suffering from customers switching to voice over internet protocol (VoIP) technology.

"We have implemented strategies to manage the decline in voice revenue while we migrate customers to VoIP and grow our new generation revenue streams.

"I am pleased that the new generation revenue streams, such as mobile and data, are now compensating for the decline in the traditional business," Maseko said.

SA, Businessday

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