Telecommunications

Telkom cuts capex amidst financial challenges

Telkom

Telkom’s capital investment in its fibre and mobile networks decreased by 14.8%, meaning it will struggle to show strong growth and lose market share to competitors in the fibre space.

Telkom’s latest capital expenditure figures formed part of its financial report for the six months ended 30 September 2023.

The operator cut its capital investment from R3.689 billion to R3.143 billion. It equates to a reduction in capex-to-revenue from 17.4% to 14.4%.

Telkom said the decrease aligns with its strategy and the cyclical nature of capital expenses.

“The decline in mobile capex spent is due to the investment in backup power in the comparative period to mitigate the impact of accelerated load-shedding,” it said.

Telkom mainly invested in its mobile business over the reporting period. Mobile capex was R1.626 billion, significantly higher than fibre at R846 million.

The R1.6 billion mobile capital investment increased Telkom’s mobile footprint by 4.1% to 7,684 integrated sites.

On the fibre side, Telkom maintained its fibre-to-the-home (FTTH) connectivity rate of 46.8% while it continued to expand its fibre rollout.

Year-on-year, Telkom increased homes passed by fibre by 20.6% and homes connected by 22.4%.

However, the lower fibre investment means that Telkom will continue to lose ground to other fibre network operators like Vumatel, Metrofibre, and Frogfoot.

These companies have moved down the value chain and are starting to cover townships and other low-income areas.

Telkom will miss out on these opportunities as there are not many opportunities for two fibre operators to offer services in the same area.

Telkom also slashed its investment in its masts and towers business by 48%. This was expected as it wanted to sell this unit.

On Tuesday, Telkom informed shareholders that it had identified a preferred bidder for the disposal of its masts and towers business housed in Swiftnet.

Telkom said that, if successfully concluded, this transaction may have a material effect on the price of the company’s securities.

Telkom further significantly reduced investment in IT solutions, property development and optimisation, and network rehabilitation.

The table below provides an overview of Telkom’s capital expenditure over the last six months.

Capex (R million)September 2022September 2023Change
Fibre967846(12.5)
Mobile1,9091,626(14.8)
IT Solutions188129(31.4)
Network rehabilitation6354(14.3)
Core network301298(1.0)
Masts and towers8946(48.3)
Digital platforms273529.6
Property development4722(53.2)
Shared services/other9887(11.2)
Total3,6893,143(14.8)
Capex to revenue ratio17.4%14.4%(17.2)

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