Release Date: November 18, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Telkom SA SOC Ltd (FRA:TZL1) reported a robust operational performance with solid data-driven growth.

• The company achieved a 12.7% increase in mobile data revenue and a 15.5% growth in fiber data revenue.

• Adjusted EBITDA improved significantly to 5.6 billion rand, yielding an EBITDA margin of 26.2%.

• The mobile business outperformed the market with a 10% growth in service revenue and a 24% increase in total mobile subscribers.

• Telkom SA SOC Ltd (FRA:TZL1) maintained positive free cash flow, improving to 768 million rand, and realized 204 million rand from property sales.

Negative Points

• There is uncertainty regarding the competition tribunal ruling on the CIVH deal, which could impact strategic decisions.

• Staff costs in Gyro were notably low, raising questions about sustainability and future expectations.

• The company faces competition in the fixed wireless access space, with peers starting to monetize spectrum.

• Concerns were raised about the 1 billion rand outflow related to the Google transaction, though it was explained as a timing issue.

• Despite strong performance, there is no interim dividend policy, and future dividends depend on debt reduction and capital requirements.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with FRA:TZL1.

Q: The competition tribunal ruling on the CIVH deal seems positive either way. If they rule positively, more suitors like MTN might be interested in Telkom. If they rule against it, could this be an opportunity for Telkom to get ahead of the competition, especially with unexpected windfalls from property sales? A: (CEO) With or without the ruling, our strategy remains clear. We continue on our path, focusing on balancing homes passed with homes connected to ensure efficient CapEx deployment. We aim to connect homes that we pass and drive the right return on investment.

Q: Staff costs in Gyro were very low this period. Why was it so low, and what can we expect for the rest of the year? Also, can you explain the Google Agreement and its financial impact? A: (CFO) The lower staff costs in Gyro are due to the divisionalization as part of the SwiftNet transaction, with staff absorbed into the group. Regarding the Google Agreement, it's a back-to-back contract with payments from both sides. The 1 billion rand outflow is a timing difference, netting off payments from Google last year and Telkom's payments now.

Q: Given Telkom's strong performance, what are your plans around dividends? When can we expect dividend payments to resume, and what magnitude should we anticipate? A: (CFO) We have a dividend policy approved by the board, targeting 30-40% of free cash flows. The board will assess free cash flow and available cash facilities before deciding. Our priority remains reducing debt and ensuring capital requirements are met.