BUSINESS NEWS - 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 FY2011, when it launched, then-CEO Pinky Moholi was adamant that, while “pushed out” from the original business case, Ebitda break-even would be in FY2014. It took three years longer.
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.
The consumer business (‘Telkom’ as we know it) reported an Ebitda loss of R146 million in the 2018 financial year. Revenue from the fixed-line unit was R9.3 billion then, with mobile at R7.2 billion. In the year to March 31, 2019, the bottom line had swung to an Ebitda profit of R1.03 billion. Mobile is now a significantly bigger business than fixed, with revenue of R10.9 billion versus R8.3 billion (it’s important to note that all enterprise business has been folded into BCX). A R1 billion revenue decline in the consumer fixed-line business is startling. While it didn’t disclose the mobile unit’s Ebitda profit in FY2019 (this writer estimates it at between R2.7 billion and R3 billion), it is all but certain this ensured the swing to profit.
