Telecommunications

Vodacom beat MTN and Telkom in 2022

Last year, despite showing a slight decline, Vodacom’s share price comfortably outperformed its rivals, MTN and Telkom.

In 2022, Vodacom’s share price declined by 9%, a much better performance than MTN (down 25%) and Telkom (down 44%).

Vodacom had a steady year and continued its good return on invested capital, low cost of capital, and strong dividend yield.

Vodacom CEO Shameel Joosub also brought stability to the operator during a tumultuous year for the markets and the economy.

MTN also had a good year and reported strong quarterly growth in its latest report, with EBITDA increasing 14.7% and revenue growth across all its major business segments.

However, the risk associated with MTN’s operations in Nigeria and other corrupt and politically unstable countries took its toll on the operator’s share price.

Telkom was the biggest loser in the South African telecommunications market after MTN walked away from a potential deal.

In October, MTN discontinued talks to buy Telkom – a deal that would have created South Africa’s largest mobile-phone operator.

MTN ended discussions because Telkom couldn’t assure that the talks were exclusive after Rain entered the fray.

Shortly afterwards, Telkom released a very poor set of financial results, sending the share price down even further.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) were down 17.3%, HEPS declined by 51.9%, and BEPS was down 52.5%.

The biggest concern is rising debt. Telkom’s net debt increased from R14.1 billion in September 2021 to R16.3 billion in September 2022.

With Telkom’s lower EBITDA, the company’s net debt to EBITDA ratio increased from 1.1 to 1.7 over the last year.

It was not just a bad six months. Telkom’s net debt increased by 2,896% over the last eight years – from R545 million in 2014 to R16.326 billion in 2022.

Telkom’s share price plummeted by 30% on the back of poor results and MTN walking away from talks to buy the operator.

The table below shows the share price performance of South Africa’s largest telecommunications companies in 2022.

CompanyShare price 1 Jan 2022Share price 31 Dec 2022Change
VodacomR134.62R122.70-8.85%
MTNR170.71R127.30-25.43%
TelkomR54.08R30.02-44.49%

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