Billions for bandwidth: Telkom’s network overhaul accelerates

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JIMMY MOYAHA: Telkom SA SOC [state-owned company] Limited released its full year’s numbers for the financial year ended 31st March 2026. This partially state-owned entity saw a healthy profit of just over R3.5 billion. This in stark contrast to the almost R10 billion loss at which the business was running back in 2023.

We’re looking at the business and its turnaround with the chief financial officer at Telkom, Nonkululeko Dlamini. She joins me on the line now to see what we make of the performance.

Nonkululeko, lovely having you on the show. Thanks so much for taking the time. Another good year for the Telkom business, another strong year as part of a turnaround strategy that has clearly been paying off over the last couple of years.

The last time you and I caught up, at the end of the last financial year, the numbers were looking positive, the business had momentum – and that momentum continued into this year.

NONKULULEKO DLAMINI: Indeed. Good evening to your listeners as well. The strategy that we adopted – indeed it was three years ago when we decided to go the route of a One Telkom approach and to basically strengthen the position of our data strength.

We call it a data-led strategy, where our mobile services as well as the utilisation of fibre has shown growth and great strength in the financial year that we’ve just closed.

You can see our data-led revenue growing significantly at over 9%. And that indicates that the strategy is indeed delivering, as we would have wanted to see it delivering.

JIMMY MOYAHA: Nonkululeko, let’s take a look at the profit from a business perspective. Profits came down by more than 50%.

Ordinarily that would worry investors, which would worry shareholders, which would worry everybody – but we did obviously come off a very high base with the Swiftnet deal being part of last year’s financials, and not this year’s.

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Take us through the rest of the performance outside of those sorts of one-off transactions.

NONKULULEKO DLAMINI: Yes. Last year we did deliver the sale of Swiftnet, and it was again a critical element of our strategy, because we took a decision to exit the Towers [business] that we felt were non-core in our business, and because those delivered a significant contribution to the profit.

Read: Telkom finalises R6.75bn Swiftnet tower sale to Actis-led consortium

But we always said that was a once-off.

And if you look at the underlying business, which we had shown already last year, we’ve shown growth on that part of the business as well. So if you look at the underlying business performance, Jimmy, we are seeing strength there as well, because if you just look at the Ebitda [earnings before interest, taxes, depreciation, and amortisation] margins that have grown 10% year on year, just on the continuing business, that is great strength.

And we did say last year some of the non-core business that we were dealing with was the exit of non-core properties that contributed to a very strong cash position, and that assisted us to drive down the debt levels, which were fairly high.

As I talk to you today, our net-debt-to-Ebitda has come down to the levels of 0.5 times. If you look at that number about three years ago, it was just above 1.5 times.

It’s been part of our journey to strengthen our balance sheet, and that can assist the flexibility for us to look for other growth opportunities. And therefore it is, again, part of us driving a particular strategy.

Maybe another element to highlight is our focus on cost optimisation because as much as we want to grow revenue, we want to ensure that the business is being driven at a good level of cost.

And lastly, we’ve seen the strategy paying off in that – last year the board reinstated the dividend policy, where we had agreed to pay our shareholders at the level of 30-40%. We paid out a 30% ordinary dividend on the basis of free cash flow. But in this financial year, with the strength and the sustainability of performance, the board has looked again at the dividend policy and has actually revised it up from the 30-40% we had last year to a 40-60% range.

And we’ve paid out a dividend to our shareholder of 45% of our free cash flow.

Our free cash flow has remained fairly strong and has delivered R3 billion in this financial year, compared to R2.8 billion last year. So good performance all around, Jimmy.

JIMMY MOYAHA: Nonkululeko, that discipline is clearly paying off from a balance-sheet perspective. You touched on the fact that the business is looking at opportunities where they may present themselves.

I want to get a sense of what those opportunities look like for Telkom. The business does have obviously the Telkom consumer business, the Openserve business. Those businesses went through some impairments a couple of years ago. The sale of Swiftnet now means that the balance sheet has opened up a little bit.

How does the business, from a strategic point of view, start to look at what fits into the current Telkom as we know it?

NONKULULEKO DLAMINI: Yes. So in the immediate, Jimmy, for us the strategy is to further harvest this data-led growth. And we’ve actually focused on the regional strength by ensuring that we strengthened our presence across the footprint of the country.

That is to drive further growth in our prepaid business.

If you look at the Telkom business, we’ve seen good, good performance, leading the market in 14 consecutive quarters in the prepaid storyline, where we’ve been leading the market over this extended period.

If we look at our Openserve, it is basically carrying the footprint of fibre across the country. And even in that space where we had legacy [systems], copper and all that, we’ve seen a turnaround there where we’ve seen for the first time a positive improvement of growth in revenue. And again, it is how we further extend that growth.

The third element, which is part of our core strategy, is basically the work we need to do in the BCX business, which is largely the IT leg in the context of the economic conditions and the struggles that our Enterprise business is facing. It is how we continue to utilise the strength of BCX to turn around that part of the business, to ensure that the guidance we’ve given to the market, specifically around the revenue growth, which is at mid-single digits, gets realised over the medium term.

JIMMY MOYAHA: Nonkululeko, before I let you go, I want to take a look at the capex plans still staying within the 12-15% range as outlined in the Sens announcement today.

But obviously with the business being spread out as it is, with the need for cybersecurity growing, BCX might want a larger chunk of those funds. At the same time, with the Telkom consumer business seeing an increase in mobile data, subscribers to almost 20 million subscribers there, they might make a very good case for why they would need capex.

How is the business looking at capex expenditure going into the new financial year, understanding that all of the business units are performing relatively well?

NONKULULEKO DLAMINI: Our capital expenditure for the current year actually grew by about 10.4%.

And the focus again was in the areas of business that are driving this data-led growth. And if you look at the capex expenditure largely focused on our mobile business as well as fibre, we’re also looking at modernising our systems so that we can ensure that the customer experience continues to improve.

And you will see that there’s growth from 7% in the piece of the cake that is capex, in order to focus on the modernisation that has grown from that 7-15%.

But in terms of the range, we’re still very comfortable that the 12-15% range will assist us in moving forward with the business; and we continue to want to invest for the benefit over the next 12-18 months in advance, so that we can support the growth that we are driving through this data-led strategy.

So the capex expenditure is a critical part, but at a comfortable level with the R6.4 billion that we spent in the current year.

JIMMY MOYAHA: A business that has been in the process of turning around and continues to reap the benefits of that turnaround strategy – a disciplined approach and an approach to looking at expansion where necessary.

The team at Telkom is clearly very focused on continuing to improve that balance sheet and continuing to reward shareholders in the process.

Thanks so much to the chief financial officer Nonkululeko Dlamini for joining us to take a look at the performance of Telkom throughout the year and where the business sits at the moment.