Telkom SA SOC Ltd (TKG.JO) Earnings Call Transcript & Summary

Good afternoon to everyone who has joined. Welcome to Telkom SA Limited's Interim Results Presentation. [Operator Instructions] Please note that this event is being recorded. I will now hand over to Kamo to introduce the speakers. Please go ahead.

Thank you, Judith. Good afternoon, everyone. My name is Kamohelo Selepe. I'm part of the Investor Relations team at Telkom. Welcome to our Q&A session for the interim results for the period ended 30 September 2025. With me on the call is our Group CEO, Mr. Serame Taukobong; and our Group CFO, Mrs. Nonku Dlamini. Before we start with the Q&A, I will quickly provide the key highlights of our performance for the period. Starting with the group highlights. Our data-led strategy continues to drive growth. Our group data revenue increased by 7.9% to now, 59.1% of total group revenue. This was driven by fiber data-related revenue growth of 12.3% and mobile data revenue increase of 10.3%. We reported group EBITDA margin of 27.2%, but if you exclude the noncore property disposals, it stood at 26.4%. HEPS improved by 16.4% to ZAR 3.06, highlighting the quality of our earnings. Free cash flow was stable at ZAR 724 million. Cash generated from operations before CapEx spend increased by 7.9%. Going into the BUs. Our Mobile business continues to deliver market-leading service revenue growth, which increased by 7.9%. The growth in our Mobile business was driven by our Prepaid segment. Our CVM, Mo'Nice, contributed 48.2% to prepaid service revenue, and this is where we drive very compelling pricing and propositions in our Mobile business. Mobile EBITDA margin expanded to 27.6%, with roaming costs and impairment of receivables remaining stable. Going to Openserve. Openserve grew revenue for the second successive quarter, and overall revenue for the business increased by 2.7% in the first half. Revenue grew across all segments in Openserve. Enterprise revenue was up 15.7%, broadband revenue improved by 7.3% and carrier services revenue increased by 5.1%. Openserve continued with its industry-leading connectivity rate, which stood at 52%. The EBITDA margin of the business was resilient at 33.3%, driven by revenue growth and cost efficiencies. Jumping into BCX. The targeted actions implemented have resulted in improved profitability. As a result, EBITDA margin for the business improved to 9.9%. This was due to a 4.5% decline in operational expenditure. The IT business in BCX increased by 1.2%, with IT services portfolio revenue being resilient. Fiber-related data revenue within Converged Communications grew by 13.8%, offsetting a decline in traditional connectivity and voice services. We can now hand over back to the operator to start the Q&A. Thank you.

[Operator Instructions] Our first question comes from Maddy Singh of HSBC.

I just wanted to hear your views on the current competitive environment in South Africa, especially on the prepaid side. Do you see this almost price war situation continue for a while? Or do you see some improvement in the environment? So that's the first question. And then second question is on your asset monetization plan going forward. Is likes of Openserve or any other OpCo is still up for potential monetization? And if so, what are the most likely scenarios you can think of them getting monetized?

Thanks, Maddy, for your questions. If we look at the competitive environment in South Africa, absolutely, it will continue. And what's important, Maddy, is that we stick to our knitting. What's key for us is that our data-led strategy is clearly yielding results. Competition is buckling in response to our strength, and we will continue to leverage our strength. Our CVM propositions are driving the right price points for our customers. Competition is struggling to meet those price points. And we have seen it in 12 consecutive quarters of leading revenue growth. So that is the key thing for us, that Telkom Mobile, as we said, is now the benchmark of growth in the sector, and it is for competition to follow us. In regards to asset monetization, as we've said, Openserve is key to our InfraCo strategy. There is no plans in terms of any further asset monetization in that regard. I hope I've covered you there, Maddy.

Yes. Any other assets which can be monetized besides Openserve?

Not at this point, Maddy.

[Operator Instructions] The next question comes from Preshendran Odayar of 36ONE.

Congratulations on the results and congratulations, Kamo, for stepping up there. I don't know if this is a very, very early succession plan for Serame, but he's still quite young and got a few years left. But I'll start with two quick questions. First is on Openserve's revenue and EBITDA. Can you perhaps give us the split of what's coming from the legacy copper business and what's coming from fiber? Then second one is more for Nonku. Your plans for the debt that is maturing in 2027, just want to know what your plans are for that? And if I can bolt that on to potentially higher dividend payout that could happen at the end of this 2026 financial year, if you're weighing those two options out?

Thanks there, Presh. I'm certainly encouraged by the step-up of young Kamo. It looks like our talent pipeline is growing quite well. If we look at the Openserve revenue, were you talking to legacy and fiber?

Yes, legacy and fiber.

I think what we've reported there is the fiber is -- legacy is now contributing close to -- it's almost insignificant. I think it's under 10%-odd is the fiber revenue at that level. We don't disclose at an EBITDA level yet, Presh, so I have to be kicked under the table to give you those details. And then the next question was to Nonku.

Yes. Thank you, Presh. So largely, the upcoming maturities are related to the bond issuances that we have. And in fact, we have been engaging in the same roadshows with the bond market. And in the context of continued leveraging the balance sheet, we are considering refinancing the bonds that are maturing. And depending on the feedback from the market when we finally do deal roadshows, we will then assess on whether it is a clear refinancing, obviously, looking at the cost and the tenor that we get as well as the market interest in the sounding that we will do. But I think for where we are, we are driving a strategy of refinancing the maturing bonds. And yes, most of them will be probably be in H1 of 2027.

I hope we covered you there, Presh.