Telecommunications giant Telkom’s earnings pummelled more than 50%, as it struggled to keep up with competition from its rivals and customers migrated to new technologies.
The ‘big six’ network operator delivered its financial results for the six-month period to 30 September 2022, showing a 51.9% fall in headline earnings per share (Heps) to 137.2 cents per share. Basic earnings per share declined 52.5% to 131.6 cents per share.
The telecoms company said the reporting period was marked by increasing competition, explaining that its legacy fixed-voice business saw some declines in the wake of customers ditching old technologies and moving to fibre and LTE connections.
However, this was offset by an increase in mobile handset and IT hardware and software sales.
“These sales are at lower margins and in line with the mobile strategy to drive post-paid annuity revenue,” it said.
Its mobile unit was flat, growing by a mere 0.5%. Its mobile product mix shifted towards longer post-paid contracts, while the pre-paid surge slowed.
The company’s pre-paid subscriber base grew by 10.7% to R15.2 million while the post-paid base increased by 11.7% to R2.9 million.
South Africa’s weak economic conditions, which have eroded consumers’ spending power, and the impacts of load shedding have also negatively impacted the company.
“The period was characterised by strained economic conditions placing consumers under pressure and an intensely competitive landscape,” Telkom said.
“Group performance suffered under a sluggish economy, increasing electricity and fuel prices, rising interest rates cycle, and high unemployment, which constrained and impacted levels of consumer spending.”
Revenue was down 0.7% to R21.1 billion, resulting from a drop in fixed, mobile an IT service revenue.
The company’s service fees rose 21%, as increased load shedding led to significant increases in its diesel expenses. It also incurred higher advisory fees related to mergers and acquisitions and transactions of key strategic projects.
By 14:35 on Wednesday, Telkom’s share price had fallen 3.66% to R34.49.