South Africa: Without mobile, Telkom would be in big trouble

5 July 2019

Telecoms

Analysts have long criticised Telkom since its entry into the mobile market in October 2010, which hasn’t come cheap.

In the six years since Telkom’s mobile business launched (originally under the 8ta brand), it racked up a total of R7-billion in earnings before interest, tax, depreciation and amortisation (Ebitda) losses.

The first few years were indeed rocky. In the 2011 financial year, when it launched, then-CEO Nombulelo Moholi was adamant that, while “pushed out” from the original business case, Ebitda break-even would be in FY2014. It took three years longer.

Mobile is a business in rude health. At the end of March, it had 9.68 million active customers, with nearly 1.9 million of those on post-paid

However, in the past three financial years, it has generated positive Ebitda of approximately R5-billion. By the end of this financial year (March 2020), the unit will have clawed back all of the historical losses. Turning a profit, though, is only one piece of the equation.

Telkom today is a very different business from a decade ago (even five years ago):

   The mobile unit is at scale;

   The mistaken foray into Africa (Multi-Links and iWayAfrica) has long been exited;

   The acquisition of BCX in 2016 helped grow revenue at the expense of margins (the business’s margins are structurally lower than Telkom’s);

   The wholesale unit has been separated into Openserve; and

   The traditional fixed-line business is in deep trouble.

Just how much trouble is clear from financial results for the past two years.

Read the full article on TechCentral here.