Telkom tanks as growth stalls

Telkom’s share price dove by as much as 8.7% on Tuesday after the company released lacklustre annual results for the period 1 April 2021 to 31 March 2022.
Although the company reported strong growth in its fibre segment, it could not offset the effects of stalling mobile growth and declines in its overall fixed-line market share.
The share price decline took Telkom’s market cap under R19 billion — from R20.7 billion to R18.9 billion.
Interestingly, competitor CIVH, which owns Vumatel and Dark Fibre Africa, was recently valued at around R30 billion when Vodacom offered to buy a 30% stake.
The purchase price includes around R9 billion in cash and fibre assets worth R4.2 billion.
Taking into account Vodacom’s fibre assets, the combined Vodacom-CIVH entity would be worth R44 billion.
Telkom shares were trading between R37.75 and R37.85 at the time of publication — between 6.75% and  7% lower than its opening price on Tuesday.

Although Telkom’s results show an increase in fixed broadband subscribers for the first time since March 2016, the picture for the company remains bleak.
Mobile — its biggest growth driver — flattened in terms of subscribers and revenue over the past year, raising fears that it may be plateauing.
Telkom Mobile active subscribers — March 2011 to March 2022
After a period of exponential growth, Telkom’s active mobile subscribers appear to be on a declining growth trajectory.

Telkom Mobile broadband subscribers — March 2014 to March 2022
More concerning was that Telkom’s mobile broadband subscribers were flat compared to six months ago.

Telkom Mobile revenue — March 2017 to March 2022
Similar to its broadband subscriber chart, Telkom’s mobile revenue flattened after a period of rapid growth between 2017 and 2022.

Telkom Mobile data revenue — March 2012 to March 2022
The chart of Telkom’s mobile data revenue over the past 10 years is devastating. Its hockey-stick uptrend has been suddenly derailed.
Telkom blamed South Africa’s “intensely competitive landscape” and warned investors to expect the mobile division’s growth to level off.
“Telkom Mobile has grown ahead of the market and secured a third market position,” the company stated.
“Going forward, we expect Telkom Mobile to grow in line with its industry peers.”

Telkom Mobile capital expenditure
It is interesting to note that Telkom appears to have undergone a sudden change in strategy, as it slashed capital expenditure on its mobile network to pre–2019 levels.
While Telkom’s mobile capex was reduced by R1.75 billion, its fibre capex increased by R912 million. Overall, capex decreased from R8.4 billion to R7.5 billion.

Now read: Telkom’s fixed-line disaster