Telkom subsidiary BCX, which had posted declining revenue over the years, has turned the corner in the first quarter of 2024.
Yesterday, Telkom published its quarterly financial results for the three months ended 30 June, revealing that BCX revenue increased by 2.4% to R3.1 billion, on the back of strong performance in the IT hardware and software business.
When Telkom announced its annual financial results in June, BCX reported a revenue decline of 2.3% to R12.9 billion, amid a highly-competitive market and inflationary pressures.
In its financial results for the third quarter of 2024, the Telkom subsidiary saw a marginal revenue decline, at 0.7% against the prior quarter, to R3.5 billion.
According to the latest results, BCX’s IT business grew reported revenue by 7.1% to R1.8 billion, primarily driven by the continued over-performance of the software and hardware business.
The IT hardware and software business saw revenue growth of 22.5% year-on-year (YOY), driven by an increase in new business and clearing of backlog orders.
While the low-margin hardware and software business supports revenue growth, it is done strategically to allow BCX to gain access to a wider client base to enable the selling of high-margin IT services in order to improve product mix, says the company.
It adds that the growth in the IT hardware and software business is primarily due to the growth in the local business unit, with an increase of 29.8%. The IT services revenue was stable at R1.1 billion.
The converged communications business revenue declined by 3.2% to R1.38 billion, driven by the continued migration from legacy services.
BCX notes legacy telephone lines continued to decline and resulted in voice revenue declines of 14.6% YOY, in line with the firm’s migration strategy.
It points out that data connectivity revenue, which contributes 33.9% to the converged communications revenue, has reached an inflection point, with 78.2% of revenue comprising next-generation network revenue.
BCX’s earnings before interest, taxes, depreciation and amortisation declined by 8% to R253 million YOY, driven by the impact of revenue growth from low-margin hardware and software business, along with converged communications legacy declines.
The company explains this was offset by the decline in impairment of receivables as collections improved.
EBITDA margin decreased by 0.9 ppts YOY, resulting in a margin of 8% for the quarter.
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