Telkom subsidiary BCX’s revenue declined marginally, at 0.7% against the prior quarter, to R3.5 billion.
This emerged today when Telkom announced its financial results for the third quarter of 2024.
The JSE-listed telecommunications company says the majority of BCX’s converged communications decline was offset with growth in IT, as it continued to drive growth in this portfolio.
Over the years, BCX has been facing declining revenues largely as a result of dwindling voice revenues.
In the latest results, BCX’s IT business grew revenue by double digits of 13.1% to R2.1 billion, largely driven by the continued over-performance of the software and hardware business, which saw growth of 34.2%, supported by the improved order fulfilment due to the easing of the global chipset shortage.
Says Serame Taukobong, Telkom group CEO: “While the low-margin hardware and software business sustains revenue, it is done so strategically to allow BCX to gain access to a wider client base and facilitate expansion into high-margin IT services, in order to improve the product mix.”
The business also benefitted from strengthened cloud offerings and solutions, due to the acquisition of Dotcom, he notes.
BCX’s converged communications business revenue declined by 16.4% to R1.36 billion, impacted by declines in traditional fixed voice and data, due to ongoing migrations to next-generation products and subscription churn.
The company states that data connectivity revenue reached an inflection point, with 78.2% of revenue comprising next-generation revenue.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) declined by 27% to R322 million, due to the impact of higher revenue growth from low-margin hardware and software business, the converged communications legacy declines, as well as higher impairments of receivables due to slow collections, particularly in the public sector.
“These were partially offset by cost reductions emanating from the staff restructuring initiative, as well as cost containment efforts in the business. The EBITDA margin contracted by 3.4ppts, resulting in a margin of 9.2% for the quarter,” says Taukobong.
The results come as Telkom is on the lookout for a strategic equity partner to invest in its BCX IT services unit, as it looks to unlock cash-flow to scale the business.
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