Telkom subsidiary Openserve has passed over one million homes with its fibre network.
This emerged when the JSE-listed Telkom today provided a trading update for the quarter ended 31 December (Q3 FY2023).
The announcement comes as Openserve positions itself as a newly-established standalone subsidiary of Telkom, with the parent company firm saying the unit continued its growth trajectory in Q3 FY2023 driven by new generation network (NGN) products and services.
In August, Telkom announced it had approved the legal and structural separation of Openserve, effective 1 September.
This, as the telecommunications company looks to transform and unlock value in the group by separating its operating businesses to become standalone entities, which started with BCX and subsequently Gyro, which now operate as separate legal entities wholly-owned by Telkom.
In a statement, Telkom says Openserve’s fixed data NGN revenue grew by 12.5%, driven by broadband (up 23.9%), carrier services (up 9.4%) and enterprise services (up 1.4%), “contributing to Openserve’s leadership in providing open access connectivity across South Africa”.
As demand for connectivity and consumption increased, it notes, Openserve saw fixed data traffic increase by 15% to 492 petabytes.
Focused on smart deployment of its fibre infrastructure, Openserve saw a sustained increase in its overall broadband base over the last four quarters, which grew to over 567 000 billed connections, it adds.
According to the company, continued demand for fibre services and growth across its data portfolio resulted in a sustained growth of 5% in revenue from Openserve’s external channels, contributing to its Q3 FY2023 total revenue of R3.2 billion.
Legacy challenges
However, it notes that as Openserve transforms its technology, revenue and channel mix, it continued to experience pressure across its legacy-based products, resulting in a 27.9% decline in fixed voice revenue.
It explains this legacy decline included migrations to NGN technology across all three segments of enterprise, consumer and small to medium business, which resulted in an overall revenue decline of 3.8% for the quarter.
“Despite the increased challenge of load-shedding, Openserve held true to its strategic objectives of providing the best customer experience in every interaction, creating digitally-led innovative solutions and providing a cost-effective high-speed network, by maintaining its core and aggregation network availability at 99.99%, and connected its fibre broadband customers within an average of less than three days, leading to an interaction NPS [net promoter score] of above 65,” says Telkom.
“Focused on providing fibre connectivity to South Africans, Openserve grew its homes passed base by 27.6% year-on-year (YOY) to more than one million.
“This focus on execution, coupled with a connect-led strategy, enabled Openserve to increase the number of homes connected with fibre by 31% to 469 556 YOY, maintaining its leading connectivity rate of 45.9%.”
The company points out that while Openserve lays the foundation for future growth, the ongoing economic pressures and load-shedding negatively impacted costs, with a significant increase of R108 million YOY in diesel spend, resulting in a lower earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of 29.4% for the quarter and EBITDA of R948 million.
Considering these challenges, it says, Openserve has actioned its energy plan by rolling out alternative energy options to over 200 key sites across the country. It will continue to de-risk itself by implementing multiple cost-effective energy solutions as part of its overall sustainable energy strategy.
Meanwhile, Telkom Consumer revenue increased by 1.7% in the quarter to R6.7 billion, despite trading in an adverse economic climate and the accelerated migration of legacy to next-generation technologies.
Says Telkom group chief executive officer Serame Taukobong: “Our traditional copper-based voice revenues continue their downward trajectory and declined by 27.5% as we de-risk ourselves from these legacy services, and now only account for 5.3% of total operating revenue for the business unit. We saw growth in fibre, which improved subscribers by 22.1% and revenue by 34.3%.”
Mobile revenue boom
Mobile revenue increased by 7% to R5.7 billion, spurred by the continued provision of its value-compelling propositions, which continue to drive data consumption, says the company.
In the quarter, mobile service revenue increased 4.5% to R4.6 billion, strengthened by a 12.9% YOY growth in active subscribers to 18.6 million at a blended average revenue per user (ARPU) of R87.
Postpaid ARPU was R204, having declined by 5.5% YOY, as Telkom levels towards its pre-COVID-19 levels, with subscribers for this base growing by 13.1%.
It notes the prepaid ARPU at R64 is holding within its target range and this base saw subscriber growth of 12.9%.
“Feeding from our strategy of growing data, our mobile data traffic grew by 25.6% to 309 petabytes, supported by 9.9% growth in mobile broadband subscribers to 11.5 million, leading to mobile data revenue growing by 5.8%,” says Taukobong.
“We remain encouraged by the growth in our non-connectivity services. Non-connectivity revenue increased by 16% to R909 million. Our airtime advance product remains a significant contributor to our non-connectivity revenue growth, as we advanced approximately R2.7 billion in airtime, now contributing 30% of total recharges.”
EBITDA declined by 28.1% to R840 million. Approximately 28.3% of the decline can be attributed to the load-shedding impact, while the balance is as a result of growth in the network footprint and an increased investment as per our previously stated intent to increase our postpaid annuity revenue contribution, Telkom states.
Capital expenditure increased by 30.4% YOY, with a spend to date of R2.6 billion, inclusive of R1.1 billion in respect of the spectrum auction, which enabled improved capacity and coverage across the telco’s 7 463 base stations, representing a 5.4% YOY increase in base stations.
“Our mobile and broadband strategies continued bearing fruit. We saw good growth in broadband as our data-led and connect-led strategies continued to drive growth in mobile and fibre subscribers, along with data usage,” Taukobong adds.
“Mobile broadband customers now comprise almost 62% of total active mobile subscribers, while Openserve's open-access network gained traction as external channels advanced to contribute more than 30% of its total revenue.
“Telkom navigated challenging trading conditions in the quarter and grew group revenue by 2.3%, driven by continued growth in new-generation technologies and increased data consumption.”
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