Telkom SA SOC Limited. JSE: TKG

Background of Telkom
With a history stretching back to 1991, Telkom SA is today South Africa’s leading communications services provider, boasting over 3.5 million telephone access lines and over a million internet ports, servicing business, residential and payphone customers. The group offers an extensive range of products and services for sale, covering the full telecommunications spectrum, including fixed-line retail voice services, equipment rental and sales services, interconnection services, dataservices, data centre operations and mobile and online services. The group’s structure consists of Telkom SA SOC Limited and wholly owned subsidiaries Business Connexion Communications and Swifnet. Operations are split into the Retail, Enterprise and Openserve divisions.
The group recorded revenue of R37 billion in 2016 and employs more than 20 000 people. Telkom shares are listed on the Johannesburg Stock Exchange (JSE) with a market cap of R31 billion. Telkom share price has underperformed on the JSE of late.
Telkom Shares Growth Driver
With a move to buy leading IT outsourcing company Business Connexion, along with higher mobile data revenue, fixed line subscription revenue and equipment sales, Telkom managed a strong performance in 2016, growing operating revenue by 13.9% and increasing after-tax profit from R3 billion to R4 billion. This followed several years of hampered results due to increased competition and lower consumer demand, which forced the company to decrease employee headcount.
Growth has also been driven by a focus on increased digitisation and enhanced mobile and internet offerings. This is all part of an extensive turnaround strategy to de-risk the mobile business, manage traditional revenue decline and improve operational and capital efficiencies. In the face of declining voice and subscription revenues, mobile data has proven to be an effective profit turner, with the group’s LTE service enjoying off the chart growth. The number of active mobile subscribers grew by 23% to 2.7 million, with broadband subscribers growing by 2.2% to just over 1 million.
Capital expenditure for the year increased to R6.1 billion, with a particular focus on investment in the new Fibre internet service, LTE, Mobile, IT systems, maintenance and rehabilitation. The group is planning to aggressively roll out its fibre network in the coming years, with a forecast of significant revenue contribution in future. Overall, Telkom shareholders enjoyed a 12.2% increase in headline earnings per share for the year, as well as a 10% increase in dividends.
Telkom Group Investor Tip
Telkom shares have had a mediocre run on the JSE in recent years, but the group’s successful turnaround strategy and renewed business model appear to have
strengthened the company. Investors are still slightly reluctant to buy Telkom shares, as the business is in a transition phase with an uncertain company. Much will hinge on the success of the group’s fibre rollout and continued investment in mobile offerings, as fixed-line revenues continue to decline. Telkom share price has been fairly stagnant during the turnaround phase, but the stocks could prove to be a savvy buy in the long-term.
Telkom Major Shareholders
The Government of the Republic of South Africa, Government Employees Pension Fund
Sector
Telecommunication Services
Industry
Telecommunication ServicesSub industry
Telecommunication Services
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Frequently Asked Questions
What is Telkom?
South Africa’s leading communications services provider that offers an extensive range of products and services, covering the full telecommunications spectrum.
Can you buy Telkom shares online?
The website of SA Shares makes it easy for you to buy JSE listed shares online.
Is Telkom shares a good buy?
Telkom shares could prove to be a savvy long-term buy.
When did Telkom list on the JSE?
2003
When was Telkom founded?
1910