Telkom’s data strategy pays off despite ICT and legacy pressures

Key topics:Data surge: Strong mobile and fibre growth lifts revenue, EBITDA and HEPS.Legacy drag: Fixed-voice collapse and ICT softness pressure top-line growth.Cost & cash strain: Higher salaries, rising capex and lower cash reserves temper gains.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.Telkom SA SOC Ltd, a company listed on the JSE Ltd., announced its Group interim results for the six months ended September 30, 2025 (H1 FY2026). The Group reported that its data-led strategy successfully delivered quality earnings and growth despite challenging operating conditions. Overall, the results showed strong gains in profitability and operational efficiency, driven by growth in its core connectivity businesses, Openserve and Telkom Consumer.The Good: Strong growth and financial resilienceTelkom’s financial performance demonstrated solid momentum across key metrics, largely due to robust growth in data services and disciplined cost management.Financial and profitability highlights:Group revenue increased by 3.4% to R22,104 million, primarily driven by strong mobile and fibre-related data revenue growth.Group data revenue increased by 7.9% and now contributes 59.1% to total revenue.Adjusted Group EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) grew by 7.4% to R6,023 million, pushing the EBITDA margin to 27.2%. This expansion reflects ongoing cost optimisation initiatives across the Group.Headline earnings per share (HEPS) grew robustly by 16.4% to 305.6 cents (on an adjusted basis), supported by increased operating profit and savings in finance charges. Basic earnings per share (BEPS) also increased by 12.7% to 325.7 cents (adjusted).Financial stability remained robust, with the net debt to EBITDA ratio maintained at a strong 0.7x, following the settlement of R4,834 million in interest-bearing debt during the period. This debt reduction led to finance charges decreasing by 27.3%.Operational successes in connectivity:Mobile business showed accelerated growth, with mobile service revenue up 7.9% and mobile data revenue up 10.3%. The total mobile subscriber base grew by 7.7% to 24.5 million, with mobile data subscribers surging by 26.7% to 18.5 million.Openserve, the wholesale infrastructure provider, reported overall revenue growth of 2.7%, underpinned by growth in enterprise, carrier services, and broadband segments. Fibre-related data revenue increased by 10.1%. Openserve’s successful commercialisation strategy saw homes connected increase by 18.1% to 756,409, achieving a market-leading active fibre connectivity rate of 52.0%.BCX (Business Connexion) achieved an expanded EBITDA margin of 9.9% (up from 9.0% in H1 FY2025 adjusted) due to strong cost management, even as it faced market pressures.The Bad: Pressure points and declinesWhile Telkom’s core data strategy delivered, challenges were noted in legacy services, certain costs, and competitive pressures.Revenue erosion in legacy and ICT:The Group continues to see a substantial decline in legacy services, specifically fixed-voice and subscription revenue, which dropped by 22.3% due to the continued migration away from fixed-voice platforms. Fixed xDSL lines decreased significantly by 52.1%.BCX faced macro-economic pressures in the enterprise business environment, resulting in delayed projects and lower technology spending. This led to IT revenue decreasing by 1.6%. Revenue for Converged Communications specifically declined by 11.3%.Cost and cash flow concerns:Although overall expenses were managed below inflation, employee expenses increased by 8.8% due to a 5.8% average salary increase and higher employee incentives, despite a 4.1% reduction in headcount.Free cash flow (FCF) was slightly lower at R724 million, compared to R768 million in the prior period (a 5.7% decline). The Group noted that FCF typically trends lower in the first half due to higher capital expenditure (capex) spend.Capex increased by 12.9% to R2,870 million, driving growth but also contributing to the lower FCF.Cash and cash equivalents decreased by 48.6% (from R11,054 million on 31 March 2025 to R5,682 million on 30 September 2025), primarily due to the proceeds from the Swiftnet sale being used to repay debt and distribute dividends..Outlook and strategyThe Group remains encouraged by its H1 performance and expects its data-led strategy to continue acting as a catalyst for growth. However, management acknowledged intensifying competition in mobile and fibre, coupled with muted corporate ICT spending in a subdued economic climate. Telkom expects the Group EBITDA margin to moderate slightly in the second half due to seasonal investment campaigns, but remains committed to operating within its medium-term guidance range of 25% to 27%..Read the results in full by downloading the PDF below

Telkom’s data strategy pays off despite ICT and legacy pressures

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