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

Good day, ladies and gentlemen, and welcome to the Telkom SA Limited interim results call. [Operator Instructions] Please note that this call is being recorded. I'd now like to turn the conference over to Sipho Maseko. Please go ahead, sir.

Thank you very much, Claudia. Thanks, and welcome to everybody. Good morning to those in the U.S., and good afternoon to everybody else. From the Telkom team, I am with a couple of my colleagues, Serame Taukobong, who is our CEO Designate; I also have our Group CFO, Dirk Reyneke; our Head of Investor Relations and Head Team, Babalwa George. And I'd like to start by taking our interim results performance as follows: I will start by unpacking the business performance we witnessed in the first half. Then Serame will spend time on Telkom consumer performance and share the outlook of this business. Dirk will then unpack the group financial performance. And then I'll come back and conclude with progress in the separate listing of [indiscernible]. So just to say that maybe at a sort of headline level, it's been a very, very difficult and tough first half of the year. We delivered very solid operational performance, and I'll start with the InfraCo side of the business, then move to the sort of retail or IST businesses. I'll start with Openserve. And maybe the headline to take away from Openserve is that the business is really starting to stabilize following a period of decline to the legacy business. The revenue was slightly down in the period by about 1.8% on a year-on-year basis, driven by the demand for mobile backhaul, which increased by about 13% in our carrier data sector. Total revenue compares favorably to the 8.5% decline reported in the prior year. Our enterprise business circuits marginally declined by about 1%, impacted by the lingering COVID impact on corporates and small and medium businesses. Despite the revenue being under pressure, EBITDA increased by about 11.2%, with a margin expanding by about 3.7 basis points. Our investment in our network enabled us to carry a 12% increase in fixed broadband traffic to about 809 petabytes. 73% of our fixed line broadband customers are using more than 10 megabits per second and higher, supporting higher data consumption. For the first time in our history of Openserve, we now have 60% of our fixed line broadband customers on next-generation technologies attesting to a very successful strategy to migrate customers from legacy to new generation. In the past, we had tweaked our FTTH strategy to improve our returns. With the highest connectivity rate in the market, we have started to further accelerate fiber rollout. We are now focusing on expanding our FTTH footprint while we simultaneously focusing on connecting premises to make sure that we maintain a higher connectivity rate. To this end, we increased the number of homes passed with fiber by 54% to 700,000 and the number of homes connected with fiber by 34% to 332,000, representing a connectivity rate of about 37%. I'll now move on to Swift, our Mason Tower business. And the headline there would be, I think the business continues to commercialize its portfolio. Revenue grew by about 73% -- 7.3% rather to ZAR 674 million, which was underpinned by increasing tenancy in our current productive portfolio and our build program on the tower side. EBITDA grew by about 10% to ZAR 532 million with the margin expanding by 2 percentage points to about 79%, underpinned by more efficiencies. As we've indicated to the market in the past, we're preparing this tower business for listing on the Jones back Stock Exchange and we are on track to conclude this by the fourth quarter of our financial year. And this, I'll touch on a bit later. BCX. BCX remains immensely under pressure. That would be the sort of headline. Revenue for the period declined by about 6% to ZAR 7.4 billion, mainly impacted by the IT segment, which continues to be under pressure, whilst the converged communication business is now starting to stabilize. Despite cost management, of which we still expect more from this team, this resulted in direct expenses declining by about 13% and OpEx declining by about 4%. EBITDA declined by about 7.7% rather to about compared to the year before as the savings that were being generated were not enough to offset the declines in revenue. The converged comms revenue declined by ZAR 4.2 billion to ZAR 3.5 billion, primarily owing to declines in data consumption as employees continue to work from home, hardware delivery backlog as a result of the global chipset shortage. However, performance was a bit cushioned by the tapering decline in fixed voice. Impressively, 63% of data access revenue in next-generation revenue that we saw -- but as indicated at the beginning, the IT business revenue is really under pressure, declining by 7.9% to end the period at about ZAR 3.8 billion, largely due to delayed projects. I mentioned the issue of supply chain disruptions and the shortage of chipsets and some of the uncertainties related to the violence we saw in [indiscernible]. I'll now hand over to Serame to take us through the consumer performance.

Thank you, Sipho. A solid performance from mobile against the backdrop of a strong performance in the prior year despite the rather heightened activity, competitive market activity. We saw our base growth by 18.8% to 16.3 million customers with a blended ARPU of ZAR 92. The biggest driver of this growth was the prepaid base which grew by 23.6% to 13.7 million subscribers and an ARPU of ZAR 67. In lieu of the challenging microenvironment, our postpaid base has held steady at an ARPU of ZAR 217. The mobile business delivered a service revenue growth of 6.8% to ZAR 8.8 billion, while the mobile EBITDA exceeded the ZAR 3 billion mark with an EBITDA margin of 29%, in line with management expectations. The prior year was marked with very high data demand. We managed to hold the data demand which was maintained at the level of same as last year at 480 petabytes, but more positively, managed to increase our data revenue by 6.1% to ZAR 6.4 billion. Our broadband base increased by 10.3% to 10.6 million subscribers, of which 9.1 million are what we post smart users. We continue to grow the mobile footprint increasing it by 12.2% to 6,910 sites, where our 4G sites increased by 42.4%. Importantly, most of these sites are within the range of 70% to 80% of fiber backhaul, which allows us to face quick backhaul updates in light of customer demand. Going forward, we will continue to invest in our network and also using roaming agreements to supplement our network footprint, allowing customers to effectively have access to free networks. Telkom has entered into a roaming agreement with MTN South Africa. [indiscernible] effective from the first of November 2021. The roaming agreement covers 2G, 3G and 4G, which will also include seamless handover between MTM and Telkom towers. Telkom also has a roaming agreement with Vodacom. This innovation will allow us then to, one, deliver our customers better experience; two, increase our footprint; and three, most importantly, manage our roaming spend in support of our efforts to drive the EBITDA margin positively going forward. Thank you.

Thank you, Serame...

Sorry, I'll hand over to Dirk now.

Thanks, Serame, and good morning, colleagues. I think let's unpack the financial messages. Despite the tough trading and economic environment, we completed the first half of the year with strong earnings -- earnings performance underpinned by, first of all, sustained group revenue, with a marginal decline of 15% to just over ZAR 21 billion. Improved profitability with group EBITDA growth of 1.2% and EBITDA margin expansion of 5 percentage points. Robust earnings growth, headline earnings grew by [ 30.4% ] year-on-year, driven by an increase in group EBITDA and a significant reduction in finance charges, ForEx losses and fair value movements. We saw accelerated capital investment contributing to a negative free cash flow of ZAR 800 million and then stable net debt-to-EBITDA ratio at 1.1x. The marginal increase in the debt-to-EBITDA ratio over our 1x guidance largely because of the lower cash balances and additional IFRS 16 leases. If we then look at sustained revenue, our group revenue was sustained at ZAR 21.3 billion, with our mobile stream continuing to be the driver of growth. Mobile revenue increased by 9.7% despite the experiencing the COVID-19 bumps in the prior year that we're comparing with. The performance was offset by the IT business, which remains under pressure due to the challenging trading environment exacerbated by the global supply chain constraints. It's however, pleasing to note that while we continue to see a decline in fixed voice and fixed data as customers continue to migrate to next-generation technologies, this rate of decline has significantly decreased. Fixed voice decline in the prior period was 29.5% and fixed data, 9.5%, and that has moved down to 14.9% and 5%, respectively, in the current period. We further continue to commercialize our current Marston Towers portfolio with a growth of 5.1% in revenues to ZAR 374 million, and this was underpinned by improving the productive tenancy ratio to 1.55x. Our improved profitability. Group EBITDA increased 1.2% to ZAR 6 billion with the EBITDA margin expanding by 0.5 percentage points to 28.1%. This was underpinned by a 3.1% year-on-year decline in OpEx cost despite an average salary increase of 6% across the board in the period. The reduction in OpEx cost and optimization of our cost to serve resulted in a reduction in our total cost to revenue ratio which reduced by 0.6 percentage points to 73.2%. We continue to optimize our mobile direct expenses. With the easing of the national lockdown, we have seen a 33.8% increase in mobile handsets, which has resulted in 2.5% increase in direct costs. However, our mobile cost efficiency ratios are continuing to improve. The ratios have continued to improve, demonstrating efficient growth in the mobile stream. This was enabled by optimized roaming costs as we maintain stringent roaming traffic thresholds and migrate traffic to our network supported by the ongoing investment in our network. I've referred to the robust earnings growth. We've seen a strong earnings growth with basic earnings per share increasing by 27.3% to [indiscernible] while headline earnings per share increased by 50.4% to [ $0.255 ] compared to the prior period. This was mainly due to a significant decline in finance charges, fair value movements and foreign exchange losses compared to the prior financial period. Accelerated capital investments. We continue to invest in our key growth areas, which are fiber and mobile, with a capital investment increase of 22.7% to ZAR 3.6 billion representing a CapEx to revenue ratio of 17%. With the highest fiber-to-the-home connectivity rate in the market, we've accelerated our fiber rollout. Fiber services now make up 45% of the total CapEx executed compared to 35% in Half 1 financial year '20 and 32% in the prior period. Avispa increased by 54.2% year-on-year in line with our strategy to increase our market share in fiber. Going forward, we will now focus on expanding the footprint while simultaneously connecting premises to ensure that we maintain the high connectivity rate, and we're targeting to get to 47% current ratio back up to above 50%. Free cash flow. Free cash Flow was negatively impacted by a significant increase in CapEx. Cash generated from operations decreased from the comparable period by 9%, largely due to changes in working capital and staff incentive payments relating to the prior year. Some of the key items impacting our cash performance as follows: finance charges paid declined largely because of the debt repayment of ZAR 1.1 billion in the prior period and a further ZAR 100 million in the current period. Tax paid has declined significantly year-on-year largely due to once-off payments of ZAR 1.2 billion relating to prior year outstanding liabilities. Free cash flow in the current period includes approximately ZAR 300 million of handsets receivables. And then the biggest contributor was the CapEx paid that increased by ZAR 1.1 billion, largely due to the payment for CapEx executed in the fourth quarter of full year '21. All of the above then resulted in the free cash flow after CapEx payment was a negative ZAR 839 million compared to a positive ZAR 211 million in the prior period. If you look at the balance sheet, our balance sheet is stable. Our solid underlying performance and our conservative funding approach enabled us to strengthen our balance sheet by repaying maturing debt of approximately ZAR 1.1 billion in the prior period. In the period under review, we continue to reduce our debt in line with our debt maturity profile. We've adequately -- we've got adequate balance sheet capacity to fund our strategy with our net debt to EBITDA stable at 1.1x, and we target to maintain our annual debt redemptions at or below ZAR 2 billion per annum to manage the refinancing profile and thus reduce refinancing risks. Our interest rate currently, the floating rate debt versus fixed rate debt is 52 to 48 ratio. This marginal change in the fixed versus floating was largely because of the repayment of maturing debt. The higher floating rate however has enabled us to benefit from the low interest rate climate, thus reducing finance charges. I think in conclusion, given the challenges of the first half, management will focus on the following for the second half: We target to grow our revenue streams ahead of half 1 performance, resulting in total year-on-year growth in revenue. This is largely in the areas of fulfilling of IT back orders driving the connections of homes that we have now passed in Half 1 and aggressively driving our mobile customer value management initiatives and implementing our mobile regionalization and township growth strategies. We will continue our relentless efforts to contain costs below inflation. And the addition of the MTN South Africa as a second national roaming provider with effect first of November will assist in optimizing our learning spend further. We remain confident that the free cash flow will normalize in the second half of the year, and we'll be able to achieve a positive free cash flow for the year. Returning cash to shareholders remains a key element of our capital allocation framework. Management and the Board remains committed to reinstate the dividend policy by the end of the current financial year. Given the advanced stage of the separate listing of Sunit, which is expected to be concluded by the end of the financial year as well as the management transition, Telkom will be in a better place to take a listed view then of the total capital allocation framework and make an announcement on the dividend policy at the end of the financial year. The Board will then deliberate on the dividend declaration at that stage. The proceeds of the value unlocked are expected to be used to either rebase the balance sheet and to reinvest in the business and/or for shareholder rewards. I will, at this stage, conclude there and hand back to Serame to talk to us about growth and the value unlock strategy.

Thank you. Thank you, Dirk. So in terms of the business portfolio and the focus on growth, as the growth of mobile continues and fixed line is starting to stabilize following periods of decline subsequent to execution of a migration strategy, management will now focus on our IT business, which has been under pressure due to various reasons. To this end, we are considering investigating a strategic intervention in the business, which will include, but not be limited to the introduction of a strategic partnership in the business. This is aimed at addressing capabilities in BCX and to ensure sustainable growth. In terms of the value unlocked strategy, which Sipho Spor and Dirk alluded to, we remain committed to the value unlocked strategy, which is PMS on Telkom's market capitalization, not representing its intrinsic value. Telkom has different classes of infrastructure assets such as data centers, a wholesale network business and Massena, which are globally valued at higher multiples for separate individual businesses than telecommunications. Telkom has made progress in consolidating the data centers in Gyro with the intention of building a carrier-neutral data center infrastructure business while nearing completion of the legal separation of Openserve. Significant progress has been made in respect of a separate listing in our [indiscernible], including, but not limited to, formal engagement with the JoyStock Exchange. The listing is expected to be concluded before the end of the financial year, subject to market conditions. Management believes that separating listing of [ sortness ] will affirm the valuation of the Mass towers business and its contributions overall to the valuation of Telkom. This concludes the formal part of the presentation. I'll hand over to Sipho for concluding remarks and for Q&A. Thank you.

Sure. Thanks, Serame. Thank you very much. So ladies and gentlemen, that's the brief highlights with regards to our performance. I think as indicated earlier on, very, very tough trading environment in the first 6 months, but the business is stable. We've seen quite a lot of pressure on the IT side. competitive pressure in the economy that is not bouncing back, but we have a resilient business, a resilient team that has shown great fortitude. Lots of plans in place that will make sure that the performance in the second half improves and offsets some of the bumps that we had in the first half, fairly confident of that. But we just need to see it through in detail over the next couple of months. So maybe back to you, Claudia, we can take a couple of questions. We probably will have about 30 minutes or so to take questions from the participants on the call.

[Operator Instructions] The first question comes from Jonathan Kennedy-Good.

Just wanted to check with you on medium-term guidance. I didn't seem to pick that up in the release. Is that mainly because of the corporate activity that's ongoing with Swift net? or can you give us a steer on, for example, CapEx, I see mobile CapEx, again, quite low in the first half relative to what the full year number was last year. So just trying to understand what, for example, CapEx will do this year. And any commentary on the medium term guidance would be helpful.

Yes, Jonathan, Dirk here. So the guidance that we've given at year-end was 3-year guidance. So first of all, very dangerous to look at that at a point in time and compare with that. We've considered that, and we decided it's probably premature to change the 3-year guidance. I think when you -- and you're right, there's a combination of things. I think there's still uncertainty around the spectrum. We didn't, at the time, expect Wave 3 and the riots in Mattel. So all those things have affected our 3-year guidance on the short term. And therefore, we decided we're not going to change it because it's still early days in the fees. But in your direct question in terms of short- to medium-term guidance, I think if you look at CapEx specifically, the level of spend that we've had in the first half in round numbers, ZAR 3.6 billion. I think that's now more evenly spread over the year. So you're probably looking at ZAR 7 billion to ZAR 7.2 billion, ZAR 7.3-ish billion for the full year, not the ZAR 8-plus billion that's previously been guided. So in the short to medium term, we're probably back at ZAR 7 billion to, let's call it, ZAR 7.3 billion. And then certainly in cash flow, we were previously talking about ZAR 2 billion. I said at the last quarter, that ZAR 2 billion will be a stretch and under pressure. We're very confident we will be back in positive free cash flow territory for the full year. There's significant on CapEx-off in half 1 that won't be in half 2, but probably closer to ZAR 1 billion, ZAR 1.5 billion than the ZAR 2 billion that we said before. I think in terms of EBITDA and revenue growth, it's early days to change those guidance -- that guidance.

[Operator Instructions] The next question comes from Vikhyat Sharma from RMB Morgan Stanley.

I think you guys have mentioned this new strategic partnership in the IT business and some, I think Sipho of indicated consolidation there as well. I wanted to know, I mean, I think, is it more kind of just normal partnering with companies that have probably got better distribution or some of those cloud partners? Or is it something you are looking to invest in terms of equity or somebody else is looking to kind of get an equity partnership into IT business? And in consolidation, I mean, I think, are you looking for kind of consolidating within the industry at some niche businesses?

Yes. So I mean, I think slightly more invasive than the first point that you mentioned. We're looking to embed a lot more capability into BCX, especially on the IT side so that we can become a lot more competitive and be able to leverage the economies of skill and scale that those strategic equity partners would bring. So maybe if I just give you a bit of an example, we have a cybersecurity team. They've been incredibly busy dealing with a lot of cyber incidents, but the cyber incident, far outnumber, the capacity for them to be able to do a lot more of those. And we are not spending enough time in terms of the R&D side of cyber. And actually, if you partner with a global scale player, you can then be able to lean a lot more into their capabilities to, in a sense, shorten the cycles of development and enhancing your capabilities and supporting your mega clients, BCX supports the large banks, almost all of them, the large retailers, almost all of them, the pharmaceutical chains and so forth. So it's very, very important, therefore, that they themselves are able to lean into back into the capability of a strategic equity partner would help their clients to remain or become best-in-class relative to their peers around the world. So that's kind of how we are thinking about it. And as the meta progresses, we'll certainly have a way of keeping everybody connected and informed appropriately. Thank you.

[Operator Instructions]

Jonathan, you don't want to ask another question?

We actually have a follow-up from Jonathan Kennedy-Good.

How did I know, Jonathan?

Sorry. I thought I'd take a chance given that no one else is asking. But could you just walk us through the kind of the operational separation that you speak about in Openserve and where we are in the process there in terms of a potential value unlock? Just some color would be helpful.

Dirk, do you want to talk about it?

Yes, Jonathan, Dirk again. Let me talk about it. I think it's an ongoing process, and you'll say I say that every 3 months. I think fair to say that we are managing that process and we're fully in control of the cadence and the timing. There are some big strategic decisions that would affect or the consequence of that was that impact on the rest of the group, and we're busy unpacking those, and I'm specifically talking things like real estate, IT outsourcing, transfer pricing, those sort of things that we do need to get right. But in terms of balance sheet split, it's done bottoms up -- sorry, top down. We are now saying how does that compare with the bottoms up in terms of valuation based on that split, that's completed. So we've got a fair idea of an indicative valuation, Yes. So I'm not going to commit to time lines. Fair to say that We've got a full SteerCo that consists of 5 of the ExCo members and advisers, external and internal. We've probably got very close to some final proposals and suggestions that we will take to the SteerCo still in the current month. And then we'll take it from there. And I think we will communicate that to the market with more detail as and when appropriate.

The next question comes from Nadim Mohamed from SBG Securities.

Just one question from my side. So you have some color on the growth you're seeing in prepaid subscribers. And it does seem quite substantial at about 24% year-on-year, but not quite to true to your revenue growth. So I'm just trying to get a sense, are there lower value customers or offerings? Or what exactly is going on in the ground.

Thank you, Nadim. I think the prepaid must be looked in 2 ways. We've got to take out the bump that we saw last year, which took the prepaid off to above 80%. The prepaid ARPU is taking back to the pre-COVID levels at the 60s. I think the range that management tracks is between 65% and 70%. The focus has also been on ensuring that we drive quality of acquisition as opposed to quantity. I think that's reflected by the fact that you're not seeing the high 30s, high 40% growth, but I think stabilizing at your 20-odds. So we've also changed our dealer contracts to reward them more on tea and equally pushing quite aggressively in the back end to drive our CVM and retention initiatives. So I think there's a lot work being done to make sure that ARPU stabilizes [indiscernible], and we're happy with the progress we've seen with that so far.

The next question comes from [ Raj Suri from Home ].

Sorry for the background noise. But 2 questions for me. One, Dirk, can you just confirm you expect free cash flow for the year to be ZAR 1 billion to ZAR 1.5 billion and the first half was down ZAR 800 million. So that's quite a swing. Maybe you could just talk us through the different moving parts. And I guess related to that is, at least I was expecting some color on dividend policy on these results. And it sounds like you delayed them, which is fair enough, but maybe you could just talk through what are the puts and takes that you expect to happen over the next 4 or 5 months, that will give you more clarity on what the dividend policy should look like going forward?

Raj, thanks for that. I think if you look at -- let's unpack the ZAR 800 million negative free cash flow for the first half. So first of all, there are some big numbers in there. If you take the positives that goes contrate negative, it's really the tax -- the reduction in tax, which is ZAR 400 million, which were in the prior year relating to the old tax issues and queries. Secondly, there's a ZAR 300 million device sale in. So that's the positive. That's the ZAR 700 million positive in half 1. Having said that, that we will do further device sales to probably similar levels in half 2. But take that as a ZAR 700 million positive. If you look at the negatives that's in there. So first of all, you will note the CapEx increase, the repayment on CapEx. And I alluded to that at year-end and the quarter results that we had an acceleration of CapEx in the fourth and third quarters of the prior year. With our 90-day payment terms, that cash was only paid out in the current year. That's in excess of ZAR 1 billion. It's close to ZAR 1.1 billion. Furthermore, you will note that in terms of working capital investment, there's a ZAR 1.1 billion in there. We see some of that reversing and actually becoming positive as we take out the cyclical nature of the inventory purchases, and we recover some of the big debtors that's currently in arrears. So we do some of that reversing. And then lastly, we had a big number, probably under ZAR 1 billion, but it's a large number relating to staff incentives that was paid out in half 1 that will not be paid out in half 2 again. So that relates to your accrual for your prior year. So if you just look at the once-offs in this ZAR 800 million, it's probably ZAR 2.3 billion, ZAR 2.4 billion of cash outflows that will not happen in the second half of the year. So if you normalize for that, you will probably be able to calculate where I get to my number. I think in terms of the dividend, as I said, the Board remains committed to reinstate the dividend policy by the end of the current financial year. I realize that there's some expectation that we would have done it now. But we believe that with advanced stage of the separate listing of Swift Net, which is expected to be concluded by year-end with a stabilization of all the management transitions, hopefully, some more certainty around spectrum by year-end I think those are probably -- yes, and fourthly, COVID, Wave 4 or not. No. I think those are the 4 major uncertainties currently that we're saying, by year-end, we should be in a better position to take a more holistic view and take that into account in the formulation of the new dividend policy and the rollout of the dividend policy. I just want to, again, reiterate that in terms of value unlock impact on the dividend policy, I think we've been clear all along that one doesn't assume that the value unlock will automatically result in a dividend or a special dividend for that matter. The value unlock, as I said, that money we reserve for reinvesting in the business and/or rebase the balance sheet, if required, and/or return cash to the shareholders or a combination of all 3 of them. So that's really the dividend story, Raj. Hope that helps.

That's very helpful on the cash flow side at least.

Raj, do you have any further questions or is that it?

I guess if I can ask the team, another African tower company listed not so long ago, a little bit disappointing price at the low end of the range, stock traded weak. How has that -- I'm sure it's something you've been watching closely. How has that sort of altered, if any way you're thinking around SwiftNet and the potential value unlock the value crystallization that comes from that listing?

Yes. No. I mean we've seen it. It has not tempered our views at all. And we've stress tested our valuation even with the early look that we've been conducting in the last couple of weeks, we're comfortable that where we would want to pitch it to be at the right point that accords to that code to the market funding that we have done before. So we are reasonably okay. But you're right, we've kind of watched it, but we're teaching it in a different way. Thank you.

The next question is a follow-up question from Vikhyat Sharma from RMB Morgan Stanley.

I think -- my question is to Serame, and I think from the results presentation where you mentioned the competitors obviously took the pricing down and Telkom is more aligning to that pricing and kind of Telkom has responded, I think your competitors have indicated that there is a lot more pressure at the bottom end of the subscriber base. So I mean, after the response that you have done and after the alignment of pricing if I may say so, I mean is the competitive intensity kind of settling down, stabilizing, let's call it, post the 6 months? Or is there still a very competitive environment because the lower end is under pressure?

I think the shape of the environment has changed since we last spoke. I think at the lower end, we remain quite competitive. We're quite happy with the approach that we've taken of not necessarily dropping price but giving more value. Where we have seen more aggressive activity is on the higher side, your a lot of bigger, bigger packages. We've also responded in that regard. Our summer campaign launched on the first of October, and the price points that we've come to are quite aggressive and competitive. So we believe that we have a very fair and balanced proposition both for the low end and for the high end. And above add to that, we also have seen very positive growth in our fiber attempts, especially from a retail perspective. the pricing there quite competitive and not just the balance of price but also speeds. As we sit today, quite happy to announce that at least over 70% of our customers on fiber are on speeds that are higher than 10 megabits per second. Equally, we have, I think, reached the inflection point where the homes passed -- the homes connected on fiber actually are higher than traditional copper. So I think we've got a nice mix in the Telkom table of good LTE pricing, but equally quite affordable and aggressive fiber. And we've also just recently announced the launch of our prepaid fiber offering as well. So I think from a broadband perspective, we've got all the tools we need to make sure that we continue to focus our ambition on driving broadband growth.

Yes. And I suppose, I mean, just to build on what Serame is saying. So the bundles are becoming bigger, fixed and mobile. And clearly, those with the right proposition on the fixed side in terms of entry-level speed and pricing will fare better. And obviously, on the spectrum side, the capacity issues will be very important. I think with the roaming agreement, the mobile team have been able to deal with the coverage issues. And the big issue now will be who then has the right amount of capacity alone to be able to bring about the right sort of value proposition on the data side to complement what we are doing on the fixed side. So I think it's going to be a lot of fun going forward in this sector in terms of the interplay between fixed and wireless and the relative entry-level points both from a bundle sizes and pricing going forward.

Mr. Maseko, we have no further questions in the queue. Can I hand back to you for closing remarks?

Sure. No, thank you very much, Claudia. Thanks very much, everybody, for joining. I think as indicated, I mean, personally, it's been a -- yes, probably one of the most difficult periods in the main, right, in the main, not just from a business perspective. I think the environment calls it has been a very, very tough time for a lot of people. So certainly commend the fortitude of the management team, just to kind of see it through. I think that it looks a lot more promising. Obviously, not going to be easy on the forward look. Lots still needs to be done. But I think there's a clear plan at least from where we sit in terms of who needs to do what to bring it home at the end of the year. And I think we're very confident around that. So thank you, Claudia. Thank you, everybody, and have a good day further, or good evening, if you are in South Africa. Thank you. Cheers.

Thank you very much, sir. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.