Wireless operations aid Telkom’s bottom line

8 Jun 2004

South African telco Telkom has reported a more than doubling of its net profit for the year ending 31 March 2004, thanks to robust growth at its half-owned wireless subsidiary Vodacom, cost-cutting at its fixed line business and streamlining across the company. Net profit for the year rose to ZAR4.52 billion from ZAR1.63 billion a year earlier, on the back of a 9% revenue increase to ZAR40.8 billion. Fixed line operations generated ZAR30.9 billion of the total, an increase of 4.6% year-on-year, while wireless operations contributed ZAR11.74 billion, up 18.7%. In the company’s first full set of financial results since listing in Johannesburg and New York on 4 March last year, its net debt to equity ratio fell to 60.6%, compared to 109.9% a year earlier; EBITDA rose 15.9% to ZAR7.8 billion. Telkom’s fixed line operations showed minimal growth at best, with the total number of fixed access lines actually falling 0.5% to 4.82 million during the course of the year, this despite repeated delays in the licensing of a second national operator (SNO) which will – in time – become a competitor to Telekom in the wireline segment. ADSL showed more promise, however, with the number of customers jumping from 3,000 in March 2003 to 20,000 a year later, while internet customers climbed 44% to 142,208.

Vodacom, Telkom’s wireless joint venture with Vodafone (35%) and investment company Venefin (15%), reported an 18.7% increase in revenue during the year to ZAR23.48 billion, while net profit climbed by 36.9% to ZAR3.03 billion. In total the group served 11.2 million customers in five African countries at the end of March, an increase of almost 30% in twelve months. In its domestic market Vodacom saw its customer base rise 23.5% to 9.7 million, 8.3 million of which were connected to pre-paid packages. In Tanzania, the company claims a 57% market share with 684,000 customers, while in the Democratic Republic of Congo Vodacom saw its share increase from 9% to 47% on the back of a rise in customer numbers from 248,000 to 670,000. After almost two years of negotiations, Vodacom finally launched commercial operations in Mozambique on 15 December 2003 and by the end of March 2004 it had signed up 58,000 customers to take an 11% market share.

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