Q1 2027 Telkom SA SOC Ltd Earnings Call

August 3, 2026

Operator: Good day, ladies and gentlemen, and welcome to the Telkom Q1 FY 2027 Trading Update Call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the call. If you should need assistance during the call, please signal an operator by pressing star and then zero. Please note that this event is being recorded. I will now hand the conference over to Kamohelo Selepe. Please go ahead.

Speaker #1: If you should need assistance during the call, please signal an operator by pressing star and then zero. Please note that this event is being recorded.

Speaker #1: I will now hand the conference over to Kamahelo Celebe. Please go ahead.

Speaker #2: Thank you, Iryn. Good afternoon. Welcome to our conference call for the first quarter of our 2027 financial year. My name is Kamahelo Celebe, as Iryn has said.

Kamohelo Selepe: Thank you, Irene. Good afternoon. Welcome to our conference call for the first quarter of our 2027 financial year. My name is Kamohelo Selepe, as Irene said. I am from Telkom Investor Relations. Before we begin, I would like to briefly explain a change to the format of our quarterly results communications. Starting with the quarter we are reporting on today, we will no longer hold the investor group meetings that we normally host the day after the publication of our trading update. The trading update will continue to be published in the morning, followed by a conference call in the afternoon at approximately this time. The timing of the call is intended to accommodate investors in countries that are on a different time zone to South Africa and to give market participants the opportunity to engage directly with management during the Q&A session.

Speaker #2: I'm from Telkom Investor Relations. Before we begin, I would like to briefly explain a change to the format of our quarterly results communications, starting with the quarter we are reporting on today.

Speaker #2: We will no longer hold the investor group meetings that we normally host the day after the publication of our trading update. The trading update will continue to be published in the morning, followed by a conference call in the afternoon.

Speaker #2: At approximately this time, the timing of the call is intended to accommodate investors in countries that are in a different time zone to South Africa, and to give market participants the opportunity to engage directly with management during the Q&A session.

Speaker #2: We believe this format will facilitate a timely and focused discussion of the quarter's performance and outlook. Any additional queries you may have subsequent to the quarterly trading update conference call should be directed to Investor Relations.

Kamohelo Selepe: We believe this format will facilitate a timely and focused discussion of the quarter's performance and outlook. Any additional queries you may have subsequent to the quarterly trading update conference call should be directed to Investor Relations. They will be attended to promptly and appropriately. The engagement format of our annual and interim results announcements remains unchanged. With that said, earlier today, our trading update for the first quarter ending 30 June 2026 was released. The trading update can be found on our Investor Relations website. We hope you had a chance to go through it. In the room with me is our Group CEO, Mr. Serame Taukobong, and our Group CFO, Mrs. Nonkululeko Dlamini. They will be taking us through the performance of the first quarter. Mr. Taukobong will touch on our operational performance for the quarter.

Speaker #2: And they will be attended to promptly and appropriately. The engagement format of our annual and interim results announcements remains unchanged. With that said, earlier today, our trading update for the first quarter ended 30 June 2026 was released.

Speaker #2: The trading update can be found on our Investor Relations website, and we hope you had a chance to go through it. In the room with me is our Group CEO, Mr. Serame Taukobong, and our Group CFO, Mrs. Nongula Kwezamine.

Speaker #2: They'll be taking us through the performance of the first quarter. Mr. Taukobong will touch on our operational performance for the quarter. He'll also briefly talk about our refreshed sustainability strategy and key targets that are contained in our inaugural sustainability report, which was published on 22 July 2026.

Kamohelo Selepe: He will also briefly talk about our refreshed sustainability strategy and key targets that are contained in our inaugural sustainability report that was published on 22 July 2026. Our Group CFO will provide the financial performance for the quarter. Our Group CEO will come back to conclude before the operator opens the line for questions and answers session. After the Q&A session, Mr. Taukobong will provide closing remarks. Please note that all financial metrics and growth rates referenced during the call are year on year, unless otherwise indicated. This means the first quarter of the 2027 financial year is being compared to the first quarter of the previous financial year. Furthermore, the normal disclaimer in terms of the forward-looking statements applies for this call. It is incorporated in the trading update released in the morning.

Speaker #2: Our Group CFO will then provide the financial performance for the quarter. Our Group CEO will then come back to conclude, before the operator opens the line for the question and answer session.

Speaker #2: After the Q&A session, Mr. Taukobong will provide closing remarks. Please note that all financial metrics and growth rates referenced during the call are year-on-year, unless otherwise indicated.

Speaker #2: This means the first quarter of the 2027 financial year is being compared to the first quarter of the previous financial year. Furthermore, the normal disclaimer in terms of the forward-looking statements applies for this call.

Speaker #2: And it is incorporated in the trading update released in the morning. I will now hand over to Mr. Serame Taukobong to take you through the operational performance for the first quarter.

Kamohelo Selepe: I will now hand over to Mr. Serame Taukobong to take you through the operational performance for the first quarter. Over to you, sir.

Speaker #2: Over to you.

Speaker #3: Thank you, Kamo. And, as always, good afternoon to everyone joining us on the call today. I'd like to welcome all analysts, investors, and various stakeholders who have dialed in today.

Serame Taukobong: Thank you, Gamo, a quality good afternoon to everyone joining us on the call today. I'd like to welcome all analysts, investors, and various stakeholders who have dialed in today. We appreciate your continued interest in Telkom. We start the year 2027 already delivering on what we said when we engaged you in June. Mobile service revenue continues to lead the market, supported by unparalleled prepaid service revenue growth. We sustained the overall revenue growth trajectory in Openserve and delivered solid EBITDA growth. At BCX, the IT services, the future cybersecurity, and cloud, which we indicated they will be a key focus area, recorded robust growth. The Q1 results demonstrate the strength and quality of our data-led growth strategy and reinforce our position as South Africa's digital backbone.

Serame Taukobong: Thank you, Kamo, a quality good afternoon to everyone joining us on the call today. I'd like to welcome all analysts, investors, and various stakeholders who have dialed in today. We appreciate your continued interest in Telkom. We start the year 2027 already delivering on what we said when we engaged you in June. Mobile service revenue continues to lead the market, supported by unparalleled prepaid service revenue growth. We sustained the overall revenue growth trajectory in Openserve and delivered solid EBITDA growth. At BCX, the IT services, the future cybersecurity, and cloud, which we indicated they will be a key focus area, recorded robust growth. The Q1 results demonstrate the strength and quality of our data-led growth strategy and reinforce our position as South Africa's digital backbone.

Speaker #3: We appreciate your continued interest in Telkom. We start the year 2027 already delivering on what we said. When we engaged you in June, mobile service revenue continued to lead the market, supported by unparalleled prepaid service revenue growth.

Speaker #3: We sustained the overall revenue growth trajectory in OpenServe and delivered solid EBITDA growth. At BCX, the IT services of the future, such as cybersecurity and cloud—which we indicated will be key focus areas—recorded robust growth.

Speaker #3: The first quarter results demonstrate the strength and quality of our data-led growth strategy, and reinforce our position as South Africa's digital backbone.

Speaker #3: Groove data revenue grew by 8.8% to contribute 62.4% to total revenue, up from 58.8% in Q1 F26. This was driven by mobile data revenue increasing by 11.4% and fiber-related data revenue growth of 4%.

Serame Taukobong: Group data revenue grew by 8.8% to contribute 62.4% to total revenue, up from 58.8% in Q1 2026, driven by mobile data revenue increase of 11.4% and fiber-related data revenue growth of 4%. Group revenue grew by 2.6% as data-led revenue, that is mobile and fiber together, increased by ZAR 561 million or 9% and continued to offset traditional fixed revenue decline. This revenue growth, combined with our cost discipline initiatives, contributed to group EBITDA improving by a solid 10%, resulting in group EBITDA margin expanding to 27.7%. This reflects our strong operating leverage and ongoing efficiency initiatives. Melam Nongcu will touch on EBITDA and margins in our business units when she walks you through the financial performance. On CapEx, we invested ZAR 888 million during the quarter, mainly in mobile and Openserve.

Speaker #3: Groove revenue grew by 2.6%, as data-led revenue—that is, mobile and fiber together—increased by R561 million, or 9%, and continued to offset traditional fixed revenue decline.

Speaker #3: This revenue growth, combined with our cost discipline initiatives, contributed to group EBITDA improving by a solid 10%, resulting in group EBITDA margin expanding to 27.7%.

Speaker #3: This reflects our strong operating leverage and ongoing efficiency initiatives. Madam Nondyebo Mqulwana will touch on EBITDA and margins in our business units when she walks you through the financial performance.

Speaker #3: On CAPEX, we invested R888 million during the quarter, mainly in mobile and OpenServe. There was also a portion of the CAPEX directed towards IT solutions for the modernization of our business support systems— that's BSS— and digital platforms.

Serame Taukobong: There was also a portion of the CapEx directed towards IT solutions for the modernization of our business support systems, that is BSS, and digital platforms. In mobile, we invested primarily to expand network capacity and upgrade base stations. Furthermore, mobile invested in IT transformation and in the upgrade of the BSS and digital platforms. In Openserve, the CapEx investment was to modernize and expand its networks. Our investment program resulted in 84 mobile sites being added during the quarter, increasing our network footprint to 8,504 sites. Openserve passing 26,541 homes and connecting 26,023 homes during the quarter, an almost one-to-one ratio in quarter. The lower CapEx for the quarter was primarily attributed to the timing of multi-year projects in Openserve, as Q1 included a higher level of network projects completions and associated capital recognition. CapEx intensity at group level was 8%.

Speaker #3: In Mobile, we invested primarily to expand network capacity and upgrade base stations. Furthermore, Mobile invested in IT transformation and in the upgrade of the BSS and digital platforms.

Speaker #3: In OpenServe, the CAPEX investment was to modernize and expand its networks. Our investment program resulted in 84 mobile sites being added during the quarter, increasing our network footprint to 8,504 sites.

Speaker #3: OpenServe passed 26,541 homes and connected 26,023 homes during the quarter, an almost 1-to-1 ratio for the quarter. The lower capex for the quarter was primarily attributed to the timing of multi-year projects in OpenServe, as Q1 included a higher level of network project completions and associated capital recognition.

Speaker #3: CAPEX intensity at group level was 8%. CAPEX spend will ramp up for the remainder of our financial year, as we expect CAPEX intensity to be within our 12% to 15% guidance.

Serame Taukobong: CapEx spend will ramp up for the remainder of our financial year as we expect CapEx intensity to be within our 12% to 15% guidance. As you know, we do not provide updates on the balance sheet or free cash flow at this time of the year. Nevertheless, safeguarding the group's financial strength and delivering strong free cash flow remain core management priorities. During the quarter, we sold 100 properties with a sales value of ZAR 200 million, and 105 properties are currently in conveyancing, valued at ZAR 264 million. Let me now go through the operational performance of our business units, starting with the mobile business, which sits in Consumer. Our mobile business continued with a consistent market-leading service revenue growth, which grew by 6.4%, underpinned by a pleasing 9.1% prepaid service revenue expansion.

Speaker #3: As you know, we do not provide updates on the balance sheet or free cash flow at this time of the year. Nevertheless, safeguarding the Group's financial strength and delivering strong free cash flow remain core management priorities.

Speaker #3: During the quarter, we saw 100 properties with a sales value of R200 million. And 105 properties are currently in conveyancing, valued at R264 million.

Speaker #3: Let me now go through the operational performance of our business units. Starting with the mobile business, which sits in Consumer. Our mobile business continued with a consistent, market-leading service revenue growth.

Speaker #3: Which grew by 6.4%, underpinned by a pleasing 9.1% prepaid service revenue expansion. The continued stellar prepaid growth reflects targeted customer acquisition, de-segmentation through our best-in-class and people-led AI capabilities, together with continued success of our customer management, or CVM, platforms.

Serame Taukobong: The continued stellar prepaid growth reflects targeted customer acquisition, deep segmentation through our best-in-class and people-led AI capabilities, together with continued success of our customer management or CBM platforms. Our effective CBM platforms, Mo'Nice and Mo'Time, accounted for 54.6% of prepaid service revenue. The disciplined execution of our regional strategy continued to increase our share of acquisition and gain market share, as we achieved double-digit revenue growth in non-metro regions. The total subscriber base increased by 6.1% to 25.3 million, driven by prepaid subscriber growth of 7.1% to 22.3 million subscribers. Prepaid ARPU was stable at ZAR 59 despite adding 1.5 million subscribers year on year, evidence that we are onboarding customers that recharge on our network. Mobile data subscribers increased by 15.5% to 19.8 million and now represent almost 80% of the total base.

Speaker #3: Our effective CVM platforms, more nice and more times, accounted for 54.6% of prepaid service revenue. The disciplined execution of our regional strategy continued to increase our share of acquisition and gain market share.

Speaker #3: As we achieve double-digit revenue growth in non-metro regions, the total subscriber base increased by 6.1% to 25.3 million, driven by prepaid subscriber growth of 7.1% to 22.3 million subscribers.

Speaker #3: Prepaid output was stable at 59 rand, despite adding 1.5 million subscribers year on year. This is evidence that we are onboarding customers who recharge on our network.

Speaker #3: Mobile data subscribers increased by 15.5% to 19.8 million and now represent almost 80% of the total base. Mobile data traffic grew by 19.6% to 574 petabytes, as we maintained a high conversion rate of traffic to data revenue.

Serame Taukobong: Mobile data traffic grew by 19.6% to 574 petabytes, as we maintained a high conversion rate of traffic to data revenue, which is leading in the South African mobile sector. Prepaid data revenue growth was even higher, increasing by 15.5%. Advanced airtime lending, which represents 24.7% of the prepaid recharges, has 44.4 million active users during the quarter. We continued to manage advanced lending prudently. Our aim is not to surpass 30% of the prepaid recharges of airtime advance. Openserve overall positive revenue trajectory continued, attributable to fiber services. Fiber-related data revenue improved by 6.6% to contribute almost 90% to total operating revenue. The fiber-related data revenue growth reflects the continued transition towards high-quality, recurring infrastructure revenue. At a segment level, broadband revenue grew by 9.7% and carrier services by 2.3%. External revenue grew by 18.2%, supported by increasing demand for broadband, fiber, and connectivity.

Speaker #3: Which is leading in the South African mobile sector. Prepaid data revenue growth was even higher, increasing by 15.5%. Advanced airtime lending, which represents 24.7% of the prepaid recharges, has 44.4 million active users during the quarter.

Speaker #3: We continued to manage advanced lending prudently. Our aim is not to surpass 30% of the prepaid recharges of airtime advance. Openserve's overall positive revenue trajectory continued.

Speaker #3: Attributable to fiber services. Fiber-related data revenue improved by 6.6% to contribute almost 90% to total operating revenue. The fiber-related data revenue growth reflects the continued transition towards high-quality, recurring infrastructure revenue.

Speaker #3: At a segment level, broadband revenue grew by 9.7%, and carrier services by 2.3%. External revenue grew by 18.2%, supported by increasing demand for broadband, fiber, and connectivity.

Speaker #3: The growth of external revenue is evidence of the execution of our strategy to grow our wholesale business and expand our external customer base. The strong performance reinforces the competitiveness of our open access model, as more service providers, enterprises, and carrier customers choose OpenServe.

Serame Taukobong: The growth of external revenue is evidence of the execution of our strategy to grow our wholesale business and expand our external customer base. The strong performance reinforces the competitiveness of our open access model as more service providers, enterprises, and carrier customers choose Openserve. Growing external revenue remains a strategic priority of Openserve as it enhances the quality of earnings and diversifies the revenue base. Openserve continues to monetize its national fiber infrastructure, increasing homes connected to approximately 844,000 and expanded the fiber footprint to 1.6 million homes passed. As a result, our industry-leading connectivity rate improved to 53.9%. The resilience of our network and our ability to respond rapidly to major disruptions while maintaining high service standards for our customers resulted in Openserve delivering network availability of 99.94% for broadband, 99.92% for aggregation network, and 99.99% for the core network.

Speaker #3: Growing external revenue remains a strategic priority for OpenServe, as it enhances the quality of earnings and diversifies the revenue base. OpenServe continues to monetize its national fiber infrastructure, increasing homes connected to approximately 844,000, and expanded the fiber footprint to 1.6 million homes passed.

Speaker #3: As a result, our industry-leading connectivity rate improved to 53.9%. The resilience of our network and our ability to respond rapidly to major disruptions while maintaining high service standards for our customers resulted in Openserve delivering network availability of 99.94% for broadband, 99.92% for the aggregation network, and 99.99% for the core network.

Speaker #3: Customer satisfaction remained exceptionally strong for the business, with a net promoter score (NPS) of 80.6 compared to 80.1 in Q1 2026. In July, Openserve launched its own internet service provider (ISP).

Serame Taukobong: Customer satisfaction remained exceptionally strong for the business, with a net promoter score, NPS, of 80.6 compared to 80.1 in F1 2026. In July, Openserve launched its own internet service provider, ISP, as an additional channel to monetize its existing infrastructure, increase fiber adoption, and improve network utilization. Openserve currently has approximately 722,000 homes passed that are not connected. Therefore, the ISP will support the efforts of the business to improve the connectivity rate, as the focus will be connecting the homes that other ISPs are not willing or unable to connect. Let me emphasize, we remain fully aligned to our wholesale open access strategy. I will repeat. We remain fully aligned to our wholesale open access strategy. Consequently, we remain committed to providing fair, transparent, and nondiscriminatory access to all service providers on the Openserve network.

Speaker #3: As an additional channel to monetize its existing infrastructure, increased fiber adoption and improved network utilization. OpenServe currently has approximately 722,000 homes passed that are not connected.

Speaker #3: Therefore, the ISP will support the efforts of the business to improve the connectivity rate, as a focus will be connecting the homes that other ISPs are not willing or are unable to connect.

Speaker #3: Let me emphasize, we remain fully aligned to our wholesale open access strategy. I will repeat, we remain fully aligned to our wholesale open access strategy.

Speaker #3: Consequently, we remain committed to providing fair, transparent, and non-discriminatory access to all service providers on the Openserve network. It is still early days to comment on the uptake and financial metrics of the ISP.

Serame Taukobong: It is still early days to comment on the uptake and financial matrix of the ISP. Lastly, BCX has strengthened oversight of performance, pipeline quality, and deal execution. Overall, revenue for BCX declined by 10.9%, primarily due to the revenue decrease in converged communications and IT and software sales. We are encouraged by the stable IT services revenue. This is on the back of the sector continuing to be constrained and extended customer decision cycle delays. This reflects the focus on customer retention and underscores the effectiveness of our strategy to shift portfolio towards scalable, higher margin, and annuity-based offerings. Cybersecurity service revenue grew strongly by 36.6%, reflecting the sustained client demand for advanced threat management, advisory, and network protection services. Cloud revenue also grew strongly by 11.8% due to the increased consumption in the BCX One Cloud value proposition.

Speaker #3: Lastly, BCX has strengthened oversight of performance, pipeline quality, and deal execution. Overall, revenue for BCX declined by 10.9%, primarily due to the revenue decrease in converged communications, IT, and software sales.

Speaker #3: We are encouraged by the stable IT services revenue. This is on the back of the sector continuing to be constrained and extended customer decision cycle delays.

Speaker #3: This reflects the focus on customer retention and underscores the effectiveness of our strategy to shift the portfolio towards scalable, higher-margin, and annuity-based offerings. Cybersecurity service revenue grew strongly by 36.6%, reflecting the sustained client demand for advanced threat management, advisory, and network protection services.

Speaker #3: Cloud revenue also grew strongly by 11.8%, due to the increased consumption in the BCX OneCloud value proposition. IT and software revenue declined by 30.1%, and it was impacted by delivery and customer decision delays, as input costs were significantly impacted by supply chain disruptions caused by geopolitical instability.

Serame Taukobong: IT and software revenue declined by 30.1% and was impacted by delivery and customer decision delays as input costs were significantly impacted by supply chain disruptions caused by geopolitical instability. The converged communications revenue decline was due to the ongoing managed migration to fiber-based platforms and continuing pricing dynamic challenges. Fiber-related revenue declined by 10.4%. This decline was due to a loss of key client contracts and a transfer of a key government contract to Openserve. In converged communications, BCX's focus is to stabilize connectivity through disciplined renewal defense efforts, targeted retention actions, and improved pipeline conversion. Nontu will now take you through the financial performance.

Speaker #3: The converged communications revenue decline was due to the ongoing managed migration to fiber-based platforms and continuing pricing dynamic challenges. Fiber-related revenue declined by 10.4%.

Speaker #3: This decline was due to a loss of key client contracts and the transfer of a key government contract to OpenServe. In converged communications, BCX's focus is to stabilize connectivity through disciplined renewal defense efforts, targeted attention actions, and improved pipeline conversion.

Speaker #3: Nondyebo will now take you through the financial performance.

Speaker #1: Thank you, Sir Rami, and good afternoon to everyone on the call. I'll take you through our revenue and EBITDA performance. Our revenue for the quarter increased by 2.6% to R11.1 billion.

Nonkululeko Dlamini: Thank you, Serame, and good afternoon to everyone on the call. I'll take you through our revenue and EBITDA performance. Our revenue for the quarter increased by 2.6% to ZAR 11.1 billion. This was supported by continued growth in mobile and fiber-related data revenue. Telkom Consumer revenue increased by 5.3%, contributing ZAR 7.3 billion to the quarter performance. Openserve overall revenue increased by 5.6%, also contributing ZAR 3.3 billion to the quarter performance. BCX delivered ZAR 2.6 billion for the quarter, a decline from ZAR 2.9 billion in the previous reporting period. If I now turn to EBITDA and EBITDA margins, the group delivered ZAR 3.1 billion EBITDA, resulting in a group EBITDA margin expansion to 27.7% as total expenses decreased by 1.9%. The main contributors to the lower expenses are roaming costs, maintenance costs, and impairment of receivables.

Speaker #1: This was supported by continued growth in mobile and fiber-related data revenue. Telkom consumer revenue increased by 5.3%, contributing R7.3 billion to the quarter's performance.

Speaker #1: OpenServe's overall revenue increased by 5.6%, also contributing R3.3 billion to the quarter's performance. BCX delivered R2.6 billion for the quarter, a decline from the R2.9 billion in the previous reporting period.

Speaker #1: If I now turn to EBITDA and EBITDA margins, the Group delivered R3.1 billion EBITDA, resulting in a Group EBITDA margin expansion to 27.7%.

Speaker #1: As total expenses decreased by 1.9%, the main contributors to the lower expenses are roaming costs, maintenance costs, and impairment of receivables. This is testament to our disciplined strategy of continuing to drive cost efficiencies across the group.

Nonkululeko Dlamini: This is testament to our disciplined strategy of continuing to drive cost efficiencies across the group. Now, looking at EBITDA and EBITDA margin of each business unit. Telkom Consumer EBITDA improved by 17.9% to ZAR 1.7 billion, resulting in EBITDA margin expanding to 22.9%. Mobile EBITDA increased by 17.6% to ZAR 1.9 billion, driven by service revenue growth and a decline in roaming costs and impairment of receivables. The EBITDA margin of mobile remains strong at 29.1%. Openserve EBITDA grew by 6.7% to ZAR 1.1 billion due to revenue growth, disciplined cost management, and continued operational efficiencies, resulting in an EBITDA margin of 33.2%. This is despite Openserve absorbing additional costs related to network restoration from severe weather conditions and increase in fuel prices. The fuel prices were substantially mitigated through lithium battery and solar backup solutions.

Speaker #1: Now, looking at EBITDA and EBITDA margin of each business unit, Telkom Consumer EBITDA improved by 17.9% to R1.7 billion, resulting in EBITDA margin expanding to 22.9%.

Speaker #1: Mobile EBITDA increased by 17.6% to R1.9 billion, driven by service revenue growth and a decline in roaming costs and impairment of receivables. The EBITDA margin of mobile remained strong at 29.1%.

Speaker #1: OpenServe EBITDA grew by 6.7% to R1.1 billion, due to revenue growth, disciplined cost management, and continued operational efficiencies, resulting in an EBITDA margin of 33.2%.

Speaker #1: This is despite Openserve absorbing additional costs related to network restoration from severe weather conditions and increases in fuel prices. The fuel price impact was substantially mitigated through lithium battery and solar backup solutions.

Speaker #1: EBITDA margin of BCX increased by 2.6%, supported by improved margin in IT services, lower impairment of receivables, and disciplined cost management. This was partially offset by the margin impact emanating from the decline in converged communications.

Nonkululeko Dlamini: EBITDA margin of BCX increased by 2.66%, supported by improved margin in IT services, lower impairment of receivables, and disciplined cost management. This was partially offset by the margin impact emanating from the decline in converged communications. Ladies and gentlemen, that concludes the review of our financial performance for this quarter. I'll hand back to Serame to take you through our refreshed sustainability strategy and our key targets. Thank you, Serame.

Speaker #1: Ladies and gentlemen, that concludes the review of our financial performance for this quarter. I'll hand back to Sir Rami to take you through our refreshed sustainability strategy and our key targets.

Speaker #1: Thank you, Sir Rami.

Speaker #2: Thank you, Madam Nondyebo. As Gabor mentioned earlier, we published our inaugural sustainability report in July this year, which contains our sustainability strategy and the targets for 2030.

Serame Taukobong: Thank you, Madam Nontu. As Gabo mentioned earlier, we published our inaugural sustainability report in July this year, which contains our sustainability strategy and the targets for 2030. We introduced our refreshed sustainability strategy with our F2026 integrated report. At the core of our strategy is to enable digital infrastructure to foster growth for key economic sectors based on our four interconnected pillars, namely prosperity, planet, people, and practice. The development of the new strategy was necessitated by reaching almost all of our 2025 ESG goals. Let me now highlight the key targets of our sustainability strategy. Under prosperity, we have committed to supporting 100 township and rural entrepreneurs and enabling 25,000 jobs. In terms of the planet pillar, we remain committed to our ambition of becoming carbon neutral by 2035 and achieving net zero emissions by 2040.

Speaker #2: We introduced our refreshed sustainability strategy with our FY26 integrated report. At the core of our strategy is enabling digital infrastructure to foster growth for key economic sectors, based on our four interconnected pillars: prosperity, planet, people, and practice.

Speaker #2: The development of the new strategy was necessitated by reaching almost all of our 2025 ESG goals. Let me now highlight the key targets of our sustainability strategy.

Speaker #2: Under prosperity, we have committed to supporting 100 township and rural entrepreneurs, and enabling 25,000 jobs. In terms of the planet pillar, we remain committed to the ambition of becoming carbon neutral by 2035 and achieving net zero emissions by 2040.

Speaker #2: Under people, we have set a target of achieving 50% women representation in leadership positions. And lastly, in the practice pillar, our commitment is zero tolerance for data breaches, consumer data privacy incidents, and data security risks.

Serame Taukobong: Under people, we have set a target of achieving 50% women representation in leadership positions. Lastly, in the practice pillar, our commitment is zero tolerance for data breaches, consumer data privacy incidents, and data security risks. Going back then to our business and looking ahead and to conclude, we remain committed to our medium-term guidance. Our data-led strategy as a primary growth engine for the group will continue to drive expansion, supported by disciplined cost management and the One Telkom approach. In mobile, our focus remains on prepaid growth and increasing market share in under-indexed and underserved regions. As a result, we expect service revenue to grow mid-single digits and potentially above the upper end of this range. Openserve will continue to focus on growing external wholesale revenue, expanding partnerships, and improving network utilization. Furthermore, Openserve will drive greater operational efficiency through network simplification, energy transformation, and digital automation.

Speaker #2: Going back then to our business, and looking ahead to conclude, we remain committed to our medium-term guidance. Our data-led strategy as a primary growth engine for the group will continue to drive expansion, supported by disciplined cost management and the One Telkom approach.

Speaker #2: In mobile, our focus remains on prepaid growth and increasing market share in under-indexed and underserved regions. As a result, we expect service revenue to grow mid-single digits and potentially above the upper end of this range.

Speaker #2: OpenServe will continue to focus on growing external wholesale revenue, expanding partnerships, and improving network utilization. Furthermore, OpenServe will drive greater operational efficiency through network simplification, energy transformation, and digital automation.

Speaker #2: At BCX, the new leadership has commenced repositioning and reassessing the IT product portfolio to ensure the focus remains on scalable, high-margin offerings. There is further repositioning of connectivity as the foundation of digital services.

Serame Taukobong: At BCX, the new leadership has commenced in repositioning and reassessing the IT product portfolio to ensure the focus remains on scalable, high-margin offerings. There is further repositioning of connectivity as the foundation of digital services. We expect IT, hardware, and software to recover as the year progresses, with the pace dependent on the extent to which global supply chain disruptions associated with the geopolitical conflict moderate. The BCX team will continue the focus on disciplined cost management and cash collections to improve EBITDA margins. Overall, we remain confident in the strategy being implemented while recognizing that the BCX turnaround will take time to deliver its full benefits. I now hand over back to the operator and open the line for Q&A.

Speaker #2: We expect IT hardware and software to recover as the year progresses, with the pace dependent on the extent to which global supply chain disruptions associated with the geopolitical conflict moderate.

Speaker #2: The BCX team will continue to focus on disciplined cost management and cash collections to improve EBITDA margin. Overall, we remain confident in the strategy being implemented while recognizing that the BCX turnaround will take time.

Speaker #2: To deliver its full benefits. I will now hand over back to the operator and open the line for Q&A.

Speaker #3: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press the star and then one on your touch-tone phone, or on the keypad on your screen.

Serame Taukobong: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star and then one on your touchtone phone or on the keypad on your screen. You will hear a confirmation tone that you have joined the queue. If you decide to withdraw the question, please press star and then two to remove yourself from the question queue. Once again, if you would like to ask a question, you may press star and then one. The first question we have is from Maddie Singh of HSBC. Please go ahead.

Operator: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star and then one on your touchtone phone or on the keypad on your screen. You will hear a confirmation tone that you have joined the queue. If you decide to withdraw the question, please press star and then two to remove yourself from the question queue. Once again, if you would like to ask a question, you may press star and then one. The first question we have is from Maddie Singh of HSBC. Please go ahead.

Speaker #3: You will hear a confirmation tone that you have joined the queue. If you decide to withdraw your question, please raise a star and then two to remove yourself from the question queue.

Speaker #3: Once again, if you would like to ask a question, you may press star and then one. The first question we have is from Maddie Singh of HSBC.

Speaker #3: Please go ahead.

Speaker #4: Yes, hi. Thanks a lot for taking my question. I have two questions from my side. The first question is on your postpaid revenue performance.

Maddie Singh: Yes, hi. Thanks a lot for taking my question. Two questions from my side. The first question is on the postpaid revenue performance. I think revenues were slightly soft this quarter, so wondering what is happening there. For other operators, it seems they are doing better at postpaid and weaker at prepaid, but for you, seems like prepaid is very strong, but postpaid is somewhat soft. What's driving that, if you could discuss that? Second question is on BCX. Another, I would say, quite a weak quarter for BCX. How long do you wait before you take any decisive action on this segment? Thank you.

Maddy Singh: Yes, hi. Thanks a lot for taking my question. Two questions from my side. The first question is on the postpaid revenue performance. I think revenues were slightly soft this quarter, so wondering what is happening there. For other operators, it seems they are doing better at postpaid and weaker at prepaid, but for you, seems like prepaid is very strong, but postpaid is somewhat soft. What's driving that, if you could discuss that? Second question is on BCX. Another, I would say, quite a weak quarter for BCX. How long do you wait before you take any decisive action on this segment? Thank you.

Speaker #4: I think revenues were slightly soft this quarter, so I'm wondering what is happening there. For other operators, it seems they are doing better at postpaid and weaker at prepaid, but for you, it seems like prepaid is very strong, but postpaid is somewhat soft.

Speaker #4: So, what's driving that, if you could discuss it? And then, the second question is on BCX. I would say it's been quite a weak quarter for BCX.

Speaker #4: So, how long do you wait before you take any decisive action on this segment? Thank you.

Speaker #2: Thank you. We'll take another question.

Serame Taukobong: Thank you. We'll take another question.

Speaker #3: The next question we have is from Jonah Bradley of ABSA. Please go ahead.

Serame Taukobong: The next question we have is from Jono Bradley of Absa. Please go ahead.

Operator: The next question we have is from Jono Bradley of Absa. Please go ahead.

Speaker #4: Thanks, Sir Rami, and Nongcoo, and congrats on a great set of results. Just three questions from me, please. Firstly, on your prepaid and data customer trends in the quarter—net adds in both were negative.

Jono Bradley: Thanks, Serame and Nonku, and congrats on a great set of results. Just three questions from me, please. Firstly, on your prepaid and data customer trends in the quarter, net adds in both were negative. Can you maybe give some color on the customer behavior trends? I think typically it's your Q4 that is a bit weaker from a seasonality perspective, so just trying to understand why that's shifted a bit. Secondly, on the property sales, you sold 100 properties this quarter for ZAR 200 million, and I think you flagged another 105 in the process for ZAR 264 million. Can you tell us what the EBITDA uplift from these sales in this quarter was? In other words, what the gain on sale of these properties was and how many more properties you think you might sell this year?

Speaker #4: Can you maybe give some color on the customer behavior trends? I think typically it's your fourth quarter that is a bit weaker from a seasonality perspective.

Speaker #4: So just trying to understand why that's shifted a bit. And then, secondly, on the property sales—you sold 100 properties this quarter for 200 million rand, and I think you flagged another 105 in the process for 264 million.

Speaker #4: Can you tell us what the EBITDA uplift from these sales in this quarter was? So, in other words, what the gain on sale of these properties was, and how many more properties you think you might sell this year?

Speaker #4: And then lastly, just on your margin guidance—you've kept that at 25% to 27%, but you've now been above that range for the past four consecutive quarters.

Jono Bradley: Lastly, just on your margin guidance, you've kept that at 25% to 27%, but you've now been above that range for the past four consecutive Qs. Just trying to understand what is keeping you cautious around your expectations for margins going forward. Thanks very much, guys.

Speaker #4: So, just trying to understand what is keeping you cautious around your expectations for margins going forward. Thanks very much, guys.

Speaker #2: Thank you. So let me tackle some of those first. I'll start with Maddie's questions. I think, Maddie, if we look at postpaid, I mean, relative to the market, it is a bit soft, and we're not too particularly panicked about that.

Serame Taukobong: Thank you. Let me tackle some of those. First, I'll start with Maddie's questions. I think, Maddie, if we look at postpaid, relative to the market, it is a bit soft, and we're not too particularly panicked about that. I think when we look at where the postpaid battle has traditionally been, that is historically been the stronghold of both MTN and Vodacom. In terms of where we've been focusing on, it is predominantly in the prepaid sector. What the team has been doing is we're focusing significantly on the SIM-only propositions. I think if you look at recent months, in fact, in last week, the team have gone back with enhanced propositions for postpaid. I think we're quite comfortable with that journey, and I think we'll maintain our relative share and mix of prepaid to postpaid.

Speaker #2: I think we will look at where the postpaid battle has traditionally been. That has historically been the stronghold of both MTN and Vodacom. In terms of where we've been focusing, it is predominantly in the prepaid sector.

Speaker #2: What the team has been doing is, we're focusing significantly on your SIM-only propositions. And I think if you look at recent months—in fact, even last week—the team have gone back with enhanced propositions for postpaid.

Speaker #2: So I think we're quite comfortable with that journey. I think we'll maintain a relative share and mix of prepaid to postpaid, and I think we're quite steady and comfortable with where that's going, too.

Serame Taukobong: I think we're quite steady and comfortable with where that's going to. In terms of BCX, I think we've signaled, Maddie, to yourself and the market that this is an 18-month journey. We're not going to be looking at a Q-to-Q transition. What we are happy with is the short-term indications, where we are seeing the focus on your cloud services, as we've indicated there, in terms of your cybersecurity. The shape of where the focus is where we want it to be is showing the right signs. We've also indicated that the migration from your legacy copper connectivity is intentional. As we signaled to the market that this year is going to be flat, and the Q1 and H1 is showing that. H2, I think we are anticipating the reversal of that.

Speaker #2: In terms of BCX, I think we've signaled, Maddie, to yourselves in the markets that this is an 18-month journey. So we're not going to be looking at a quarter-to-quarter transition, but what we are happy with is the short-term indications, where we are seeing the focus on the cloud services, as we've indicated there, in terms of your cybersecurity.

Speaker #2: So the shape of where the focus is, where we want it to be, is showing the right signs. We've also indicated that the migration from your legacy copper connectivity is intentional.

Speaker #2: And as we signal to the market that this year is going to be flat, the first quarter and H1 are showing that. In the second half, I think we are anticipating a reversal of that.

Speaker #2: Of course, then the elements that we talked about in terms of the IT supply, which is impacting everybody else—we will hopefully see the moderation of that as the supply of critical components becomes available.

Serame Taukobong: Of course, the elements that we talked about in terms of the IT supply, which is impacting everybody else, we will hopefully see the moderation of that as the supply of critical components becomes available. That is affecting the industry as a whole. It's not a quarter-to-quarter call. It's an 18-month journey, as we've indicated. I hope that's covered you there, Maddie. Jonah, you talked of the net adds movement. Yes, the tail, I think if you see the lag, the comparison, really, if you look at that compared to Vodacom, the numbers are the same. Our prepaid base, I think, was on a quarter-to-quarter net negative by 325,000 odd subscribers compared to Vodacom at 355. It's a similar movement in terms of the bases cleaning up. We've seen that seasonality come through on a quarter-to-quarter basis across overall.

Speaker #2: But that is affecting the industry as a whole, so it's not a quarter-to-quarter call. It's an 18-month journey, as we've indicated. I hope that's covered you there, Maddie.

Speaker #2: Jonah, you talked of the net adds movement. Yes, the tail—I think if you see the lag, the comparison really, if you look at that compared to Vodacom, the numbers are the same.

Speaker #2: Our prepaid base, I think, was on a quarter-to-quarter net negative by 325,000-odd subscribers, compared to Vodacom at 355. So it's a similar movement in terms of the base cleaning up.

Speaker #2: We've seen that seasonality come through on a quarter to quarter basis across overall. Interesting though, if you look at the overall revenue growth on a quarter to quarter basis, and compare that to our peers, top line revenue, our peers have actually declined on a quarter to quarter revenue perspective.

Serame Taukobong: Interestingly, though, if you look at the overall revenue growth on a quarter-to-quarter basis and compare that to our peers, top line revenue, our peers have actually declined on a quarter-to-quarter revenue perspective, whereas we have increased both in prepaid data and also overall top line revenue growth. We're encouraged with that cleanup, and I think that's the tail end of the cleanup you're seeing, and that number continues. If we look at your properties, I think I'll leave Noku to give you more color on that. The margin in terms of why we've held that, remember what we've always said, Jonah, is that that top-line guidance is made up of all three engines coming in. It is mobile, it is Openserve, and equally, BCX, coming into the guideline that we've set ourselves for the medium-term guidance.

Speaker #2: Whereas we have increased both in prepaid data and also overall top-line revenue growth. So we are encouraged with that clean-up. And I think that's the tail end of the clean-up you're seeing.

Speaker #2: And that number continues. If we look at your property, I think I'll leave Nondyebo to give you more color on that. The margin, in terms of why we've held that—remember what we've always said, Jonah, is that that top-line guidance is made up of all three engines coming in.

Speaker #2: So it is mobile, it is Openserve, and equally, BCX is coming into the guideline that we've set ourselves for the medium-term guidance. So yes, mobile is shooting the lights out.

Serame Taukobong: Yes, mobile is shooting the lights out, but also Openserve has to come in at the 35% margin guideline, and BCX, remember, was sitting at the high end of that margin guideline, I think we'd said when this medium-term guidance was given, BCX was on the high end of that margin. I think it was just above 10%. It's a composition of all those then that give the medium-term guidance. At this point in time, that's the call that's given us the more prudent approach. It's not that we're anticipating anything negative, certainly in mobile. We want to encourage them to shoot towards the 30 line. Openserve, we certainly want them to get to the 35, but there's obviously BCX then coming through, and has been indicated that this year is flat for BCX. I hope that covers you there, Jonah.

Speaker #2: But also, Openserve has to come in at the 35% margin guideline. And BCX, remember, was sitting at the high end of that margin guideline.

Speaker #2: I think when this medium-term guidance was set, BCX was at the high end of that margin—I think it was just above 10%.

Speaker #2: So it's a composition of all those, then, that give the medium-term guideline. So, at this point in time, that's the call that's given us the more prudent approach.

Speaker #2: So it's not that we're anticipating anything negative. Certainly, in mobile we want to encourage them to shoot towards the 30 line. Openserve, we certainly want them to get to the 35, but it's obviously BCX then coming through.

Speaker #2: And as we've indicated, this year is flat for BCX. I hope that covers you there, Jonah. Nondyebo, do you want to cover the properties?

Serame Taukobong: Noku, do you want to cover the properties?

Speaker #3: Yes, thank you, Serame. So, Jonah, on the properties—as you can see, it's quite a large number of properties, but in value, it's not so significant.

Nonkululeko Dlamini: Yes. Thank you, Serame. Jonah, on the properties, as you can see, it's quite a big number of properties, but in value, it's not so significant. It's a footprint spread across the country. Therefore, in terms of the property sale margin, it really was negligible because our focus was to release the holding cost in relation to those properties, because we were not efficient in keeping them as part of our footprint. The margin itself from selling the properties was totally negligible, maybe ZAR 6 million, very, very little.

Speaker #3: It's a footprint across the country, and therefore, in terms of the property sale margin, it really was negligible, because our focus was to release the cost—the holding cost—in relation to those properties, because we were not efficient in keeping them as part of our footprint.

Speaker #3: So, the margin itself from selling the properties was totally negligible—maybe 6 million rand, very, very little. But, critically for us, is the fact that now, going forward, there will be no related cost in terms of rates and taxes, security, and everything that would go with those properties, and it's part of our long-term strategy in the cost efficiency program.

Nonkululeko Dlamini: Critically for us is the fact that now going forward, there will be no related cost in terms of rates and taxes, security, and everything that would go with those properties. It's part of our long-term strategy in the cost efficiency program. I hope that helps.

Speaker #3: I hope that helps.

Speaker #1: The next question we have is from Jonathan Kennedy Good of Precision Securities. Please go ahead.

Nonkululeko Dlamini: The next question we have is from Jonathan Kennedy-Good of Procyon Securities. Please go ahead.

Operator: The next question we have is from Jonathan Kennedy-Good of Procyon Securities. Please go ahead.

Speaker #4: Good afternoon, and thanks for taking my questions. Just two from me on your mobile business with regard to the roaming cost reduction that you mentioned, which contributed to margin expansion.

Jonathan Kennedy-Good: Good afternoon, thanks for taking my questions. Just two from me on your mobile business with regard to the roaming cost reduction that you mentioned contributed to margin expansion. Could you give us a sense of what that was, whether it was pricing declines or a reduction in volume over roaming, or a combination of both, and how much that benefited margin? Then also you reference lower impairments across the business, I think most notably in mobile and BCX. Could you give us a sense of what those lower impairments contributed to EBITDA? Thank you.

Speaker #4: Could you give us a sense of what that was—whether it was pricing declines, a reduction in volume over roaming, or a combination of both—and how much that benefited margin?

Speaker #4: And then, also you referenced lower impairments across the business—I think most notably in Mobile and BCX. Could you give us a sense of what those lower impairments contributed to EBITDA?

Speaker #4: you.

Speaker #2: Thank you, Jonah. We'll take another question, please.

Serame Taukobong: Thank you, Jonah. We will take another question, please.

Speaker #1: The next question we have is from Thando Skosvana of UBS. Please go ahead.

Serame Taukobong: The next question we have is from Thando Skhosana of UBS. Please go ahead.

Operator: The next question we have is from Thando Skhosana of UBS. Please go ahead.

Speaker #5: Hi. Great. Thank you so much for taking my questions. I'll keep it to two, please. Just in terms of the consumer, I just wanted to follow up in terms of, are you seeing an increase in the competitive environment, either from the two big players or any of the other players?

Thando Skhosana: Hi. Great. Thank you so much for taking my questions. I will keep it to two, please. Just in terms of the consumer, I just wanted to follow up, just in terms of, are you seeing any sort of increase in the competitive environment, either from the two big players or any of the other players? It would be great to just get a sense of the competitive environment and the sort of ambitions you guys have for the consumer segment, I would say for this year. The second question is just around your new ISP. I wonder if you could share some early KPIs or ambitions that you have for this. How are you planning to win market share? Then, whether you can give us a sense of when we can see the impact on your financials. Thank you.

Thando Skosana: Hi. Great. Thank you so much for taking my questions. I will keep it to two, please. Just in terms of the consumer, I just wanted to follow up, just in terms of, are you seeing any sort of increase in the competitive environment, either from the two big players or any of the other players? It would be great to just get a sense of the competitive environment and the sort of ambitions you guys have for the consumer segment, I would say for this year. The second question is just around your new ISP. I wonder if you could share some early KPIs or ambitions that you have for this. How are you planning to win market share? Then, whether you can give us a sense of when we can see the impact on your financials. Thank you.

Speaker #5: It would be great to just get a sense of the competitive environment and the sort of ambitions you guys have for the consumer segment, I would say, for this year.

Speaker #5: And then the second question is just around your new ISP. I wonder if you could share some early KPIs or ambitions that you have for this.

Speaker #5: How are you planning to win in market share? And then, could you give us a sense of when we might see the impact on your financials?

Speaker #5: Thank you.

Speaker #2: Excellent. Thank you. So, I'll start with Jonah's question. It's a mix of a couple of things, Jonah: the decline in the roaming cost.

Serame Taukobong: Excellent. Thank you. I will start with Jonah's question. It is a mix of a couple of things, Jonah, the decline in the roaming costs. One, it is, of course, as we expand our network, that also helps in contributing to the decline in the amount of roaming. Remember the nature of the contracts, we explained that impact. That affects because we carry more of our own traffic as we go down. In the kind of first part of the contract, then the new rates have started to kick in, so that also plays a role in that contributing for that. As a proportion then of revenue, that decline has contributed. I think it will most probably be about 0.5 or almost to just under 1% contribution to total margin in the group, if I am totally correct.

Speaker #2: One, it is, of course, as we expand our network, that also helps in contributing to the decline in the amount of roaming. Remember the nature of the contracts—we explained that impact.

Speaker #2: So, that affects us because we carry more of our own traffic as we go down. In the first part of the contract, then the new rates started to kick in.

Speaker #2: So that also plays a role in contributing to that. So, as a proportion then of revenue, that decline has contributed—I think it will most probably be about 0.5, or almost to just under 1% contribution to total margin.

Speaker #2: Group, if I'm not totally correct. So it's in that range of 0.5% to 1% of that margin. At a mobile level, that's one of the roaming costs.

Serame Taukobong: It's in that range of 0.5% to 1% of that margin at a mobile level. That's the one of the roaming costs. Libby, finish, then I'll let Mgqu come back to the impairments. Thando, in terms of increased competition. There's competitive activity, but I think if you look at the numbers that we're yielding, we continue to not even float above the water. We are continuing to lead the market in terms of growth. I think the competitive activity is most probably affecting MTN and Vodacom at each other, because remember, they still have the strong 2G voice base. If you look at our intrinsic and our numbers, it's actually competition, if I may be quite so bold, trying to keep up and catch up with us. We continue to set the trend, and I think our strategy remains quite focused.

Speaker #2: Let me finish, and I'll let Nongcoo come back to the impairments. Thando, in terms of increased competition—I mean, there's competitiveness—but I think if you look at the numbers that we're yielding, we continue to not even float above the water.

Speaker #2: We are continuing to lead the market in terms of growth. I think the competitive activity is most probably affecting MTN and Vodacom, rather than each other.

Speaker #2: Because remember, they still have the strong 2G voice space. And if you look at our intrinsic and our numbers, it's actually competition, if I may be quite so bold, trying to keep up and catch up with us.

Speaker #2: So, we continue to set the trend, and I think our strategy remains quite focused. There is really no need for us to be changing any of our price points or any of our price propositions.

Serame Taukobong: There is really no need for us to be changing any of our price points, any of our price propositions. Our strategy remains quite on track. Despite what competition have been alluding to in terms of closing the gap, we see absolutely no impact of that in our market. In regards to the new ISP, as we've articulated, currently, we have passed about 722,000 homes that are not connected. It's in instances where current ISPs are either unable or not willing to connect these homes. That's a key focus of this ISP. It is something not totally different to what other operators are doing. For us, it's really to make sure that we are setting our assets, because this is 722,000 homes that we can improve.

Speaker #2: Our strategy remains quite on track. Despite what competition have been alluding to in terms of closing the gap, we see absolutely no impact of that in our market.

Speaker #2: In regards to the new ISP, as we've articulated, currently we have passed about 722,000 homes that are not connected. And it's in instances where current ISPs are either unable or not willing to connect these homes.

Speaker #2: And that's a key focus of this ISP. It is something not totally different from what other operators are doing. And for us, it's really to make sure that we are setting up our assets, because this is 722,000 homes that we can improve.

Speaker #2: So, one of the key focus areas that we've set, for instance, to open surf, is that we need to get our connectivity rate from 53% to 60%.

Serame Taukobong: One of the key focus that we've set, for instance, to Openserve is we need to get our connectivity rate from 53% to 60%. This is one of the ambitions to make sure that we are utilizing and being able to achieve this ambition. As I said, it's early times in terms of the full KPIs that we'll set for this, but this will be one of the key indicators to say, can we get our connectivity rate up to 60%, for example. We'll shed more color there, Thando, on more of these KPIs. Mgqu, do you want to talk on the impairments?

Speaker #2: And this is one of the ambitions—to make sure that we are utilizing and being able to achieve this ambition. So, as I said, it's early times in terms of the full KPIs that we'll set for this.

Speaker #2: But this is one of the key indicators to say, can we get our connectivity rate up to 60%, for example? So, we'll share more color than Thando on more of these KPIs.

Speaker #2: Nondyebo, do you want to talk on the payments?

Speaker #3: Yes. So, Jonathan, if you look at impairments of receivables, it really has been a continuing journey from where we were two or three years ago.

Nonkululeko Dlamini: Yes. Jonathan, if you look at impairments of receivable, it really has been a continuing journey from where we were two, three years ago with the strengthening of the vetting processes and all the renewals of contracts that we do, and a very tight leash, therefore, in when we do renewals. We've seen the impact of that in the past year. If we just look at this quarter-on-quarter impact, there's a good improvement of about ZAR 50 million that we've seen coming through, which then says our ECL requirements have continued to reduce based on the performance of our accounts receivable and the collections and the write-offs that we get through that process. It's just been a continuation of the impact from the work that the consumer team specifically has been doing in the post-pay book.

Speaker #3: With the strengthening of the vetting processes and all the renewals of contracts that we do, and a very tight leash, therefore, on when we do renewals, we've seen the impact of that in the past year.

Speaker #3: And if we just look at this quarter-on-quarter impact, there's a good improvement of about R50 million that we've seen coming through, which then says our ECL requirements have continued to reduce based on the performance of our accounts receivable and the collections and the write-offs that we get through that process.

Speaker #3: So, it's just been a continuation of the impact from the work that the Consumer team specifically has been doing in the postpaid book.

Speaker #2: I hope that covers both of you, gentlemen.

Serame Taukobong: I hope that covers you both, gentlemen.

Speaker #1: The next question we have is from Nadim Mohamed of Standard Bank Securities. Please go ahead.

Serame Taukobong: The next question we have is from Nadeem Mohammed of Standard Bank Securities. Please go ahead.

Operator: The next question we have is from Nadeem Mohammed of Standard Bank Securities. Please go ahead.

Nadeem Mohammed: Good afternoon. Well done on a solid set of results. Just three from my side. External revenue at Openserve, it seems to be very healthy, accelerating from last year to 18% year-on-year. Could you just unpack some of the trends that are sort of driving this inflection in growth? What are the sort of key drivers behind that? Secondly, if I look at BCX fiber-related revenue, it continues to decline but at a lower rate than last year. How should we think about that in terms of at what point do you think it'll stop declining and will turn positive? Lastly, the consumer margin of, EBITDA margin that is, of 33.9% seems a bit lower than what I would've expected if I look at where mobile margins tended to.

Nadim Mohamed: Good afternoon. Well done on a solid set of results. Just three from my side. External revenue at Openserve, it seems to be very healthy, accelerating from last year to 18% year-on-year. Could you just unpack some of the trends that are sort of driving this inflection in growth? What are the sort of key drivers behind that? Secondly, if I look at BCX fiber-related revenue, it continues to decline but at a lower rate than last year. How should we think about that in terms of at what point do you think it'll stop declining and will turn positive? Lastly, the consumer margin of, EBITDA margin that is, of 33.9% seems a bit lower than what I would've expected if I look at where mobile margins tended to.

Speaker #5: Good afternoon, and well done on a solid set of results. Just to note from my side, external revenue at OpenServe seems to be very healthy, accelerating from last year to 18% year-on-year.

Speaker #5: Could you just unpack some of the trends that are driving this inflection in growth? What are the key drivers behind that?

Speaker #5: Secondly, if I look at PCX fiber-related revenue, it continues to decline, but at a lower rate than last year. How should we think about that in terms of, at what point do you think it'll stop declining and will trend positive?

Speaker #5: And then lastly, the consumer margin or EBITDA margin of 22.9% seemed a bit lower than what we were expecting if I look at where mobile margins trended to.

Nadeem Mohammed: In a previous quarter, I think it was 35.5%. I know there's a bit of cyclicality in there. I just want to understand, was there anything one-off or any specific item that was driving that low margin?

Nadim Mohamed: In a previous quarter, I think it was 35.5%. I know there's a bit of cyclicality in there. I just want to understand, was there anything one-off or any specific item that was driving that low margin?

Speaker #5: In the previous quarter, I think it was 25.5%, but I know there's a bit of cyclicality in that. I just want to understand—was there anything one-off or any specific item that was driving that low margin?

Serame Taukobong: Thank you, Nadeem. We will take one more, please.

Speaker #2: Thank you, Nadim. We'll take one more, please.

Speaker #1: Sir, at this time, we have no other questions in the queue.

Serame Taukobong: Sir, at this time, we have no other questions in the queue.

Operator: Sir, at this time, we have no other questions in the queue.

Speaker #2: Perfect, thank you. So yes, the external revenue in OpenServe, as we said, is that continued and intentional focus on driving that balance. As we said in the past, OpenServe, in its legacy ecosystem, had its primary client internally.

Serame Taukobong: Perfect. Thank you. Yes, the external revenue in Openserve, as we said, is that continued and intentional focus of driving that balance. As we said in the past, Openserve in its legacy ecosystem had its primary client internally. Now the focus has been really strongly driven on externally. Contrary to the implied tension with Openserve launching its own ISP, that external revenue is actually driven by stronger partnerships with existing ISPs and actually mining the growth through those ISPs. What Beauty has done is actually taken the learnings from her past in consumer and has developed her own CBM engine in Openserve, really focusing on her top five to 10 ISPs and growing intentional growth and revenue through existing customers that sit in ISPs and upselling value propositions to them.

Speaker #2: Now, the focus has been really strongly driven externally. And, contrary to the implied tension with OpenServe launching its own ISP, that external revenue is actually driven by stronger partnerships with existing ISPs, and actually mining the growth through those ISPs.

Speaker #2: So what Beauty has done is actually taken the learnings from the past in Consumer and has developed her own CBM engine in Openserve, really focusing on her top five to ten ISPs and driving intentional growth and revenue through existing customers that sit in ISPs and upselling value propositions to them.

Speaker #2: So it's that type of focus that drives the growth of external revenue through our existing ISPs. Remember, OpenServe has over 150 ISPs on the network.

Serame Taukobong: It is those type of focus that drives the growth of that external revenues through our existing ISPs. Remember, Openserve has over 150 ISPs on the network. That is where the growth is coming from. The fiber BCX decline, as we have indicated, it is that intentional focus of moving customers from legacy to your fiber ecosystem. We have indicated, Nadeem, that this will continue as we move the converged ecosystem away from the legacy copper. As we have indicated in this quarter, we have seen that your overall data, or what you call NGN, but your fiber-related revenue is growing far higher than the legacy decline. This is part of the intentional migration that you will see in the next 18 months as part of that intentional managed journey. That is the timeline that you will see in there.

Speaker #2: So that's where the growth is coming from. The fiber BCX decline, as we've indicated, is that intentional growth, that intentional focus of moving customers from legacy to, kind of, your fiber ecosystem.

Speaker #2: We have indicated, Nadim, that this will continue as we move the converged ecosystem away from the legacy copper. We've indicated that, in this quarter, we've seen your overall data—or what we call NGN, but your fiber-related revenue—is growing far higher than the legacy decline.

Speaker #2: And this is part of the intentional migration that you'll see in the next 18 months, as part of that intentional, managed journey. So that's the timeline that you will see in there.

Speaker #2: Your consumer margin, member in the consumer—when you look at consumer top line, you've got your mobile, but you've also still got some of that legacy fixed.

Serame Taukobong: Your consumer margin, remember, in the consumer, when you look at consumer top line, you've got your mobile, but you've also still got some of that legacy fixed. Those will be your fixed lines that are still in the homes. As we then move those either to LTE or to a fiber proposition, that's what you get. What you're seeing in the consumer is almost the smaller impact of what you see in BCX. There are still those legacy domestic or SMB fixed lines that we intentionally move to either a fiber or an LTE proposition. That's where you see that little marginal drop and difference. I hope I've covered you there, Nadeem. I don't know, Nondyebo, you want to add more?

Speaker #2: So, this would be your fixed lines that are still in the homes. As we then move those either to LTE, or that's what you get.

Speaker #2: So what you're seeing in the consumer is almost the smaller, smaller impact of what you see in BCX. So, there are still then those legacy domestic or SMB fixed lines that we intentionally move to either a fibre or an LTE proposition.

Speaker #2: That's where you see that little marginal drop and difference. I hope I've covered you there, Nadim. I don't know if you want to add more.

Speaker #2: Thank you.

Nonkululeko Dlamini: No.

Serame Taukobong: Thank you.

Speaker #1: Thank you, sir. We have a follow-up question from Nadim. Please go ahead, Nadim.

Serame Taukobong: Thank you, sir. We have a follow-up question from Nadeem. Please go ahead, Nadeem.

Operator: Thank you, sir. We have a follow-up question from Nadeem. Please go ahead, Nadeem.

Nadeem Mohammed: Hi. Yeah, just two short ones from my side. Just want to understand, there's mention of a transfer of a government contract, I think from BCX to Openserve. Just want to understand, was that a material sort of amount in terms of revenue and EBITDA contribution? Secondly, on the question on the fiber-related data within converged comms, that did decline by 10%. Just to understand, is that part of the switch from legacy to fiber, or is that a specific loss of clients that you expect to lap at some point later this year? Thank you.

Nadim Mohamed: Hi. Yeah, just two short ones from my side. Just want to understand, there's mention of a transfer of a government contract, I think from BCX to Openserve. Just want to understand, was that a material sort of amount in terms of revenue and EBITDA contribution? Secondly, on the question on the fiber-related data within converged comms, that did decline by 10%. Just to understand, is that part of the switch from legacy to fiber, or is that a specific loss of clients that you expect to lap at some point later this year? Thank you.

Speaker #5: Hi. Yeah, just two short ones from my side. I just want to understand—there's mention of a transfer of a government contract, I think from BCX to Openserve.

Speaker #5: I just want to understand, was that a material sort of amount in terms of revenue and EBITDA contribution? And then, just secondly, on the question regarding the fiber-related data within converged comms—that did decline by 10%.

Speaker #5: Is that a part of the just to understand, is that part of the switch from legacy to fiber, or is that a specific loss of clients that you expect to lap at some point later this year?

Speaker #5: Thank you.

Speaker #2: So, that was a bit of both. One was actually, as we'd indicated, a loss of a client. And secondly, it speaks to the second point that you mentioned.

Serame Taukobong: That was a bit of both. One was actually, as we indicated, a loss of a client, and secondly, it talks to the second point that you mentioned, a migration of a contract. That is the, we refer to the SITA contract. It's the overarching one for connectivity. The anticipated impact for that for the year is just under about ZAR 180-odd million. The contract is a joint contract between BCX and Openserve, but the majority of that project, because it talks of a fiber connectivity element of it, is actually executed in Openserve. That's what you're seeing in terms of the internal recognition of that revenue. I hope that covers you there, Mr. Nadin.

Speaker #2: Migration of a contract—that is, we refer to the CETA contract. It's the overarching one for connectivity. So the anticipated impact for that, for the year, is just under about R180-odd million.

Speaker #2: So this is the contract was one is a joint contract between BCX and OpenServe. But the majority of that project, because it talks of a fiber connectivity element of it, is actually executed in OpenServe.

Speaker #2: So that's what you're seeing in terms of the internal recognition of that revenue. I hope that covers you there, Mr. Nadim.

Speaker #5: Thank you.

[Analyst]: Thank you.

Nadim Mohamed: Thank you.

Speaker #1: Thank you. At this time, we have reached the end of the question-and-answer session, and I would like to hand back to Serame Taukobong for any closing remarks.

[Analyst]: Thank you. At this time, we have reached the end of the question and answer session, and I would like to hand back to Serame Taukobong for any closing remarks.

Operator: Thank you. At this time, we have reached the end of the question and answer session, and I would like to hand back to Serame Taukobong for any closing remarks.

Speaker #2: Thank you, Kylie, for joining us today and for your continued interest in telecom. A replay of the call will be available later today, and the transcript will be made available on our website.

Serame Taukobong: Thank you kindly for joining us today and for your continued interest in Telkom. A replay of the call will be available later today, and the transcript will be made available on our website. Should you have any further questions, please contact our investigations team, who will be more than pleased to follow up after the call. We look forward to continuing our engagement with you in the months ahead. This concludes today's call. Thank you, and do have a quality day onwards.

Speaker #2: Should you have any further questions, please contact our investigations team, who will be more than pleased to follow up after the call. We look forward to continuing our engagement with you in the months ahead.

Speaker #2: This concludes today's call. Thank you, and have a great day ahead.

Serame Taukobong: Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.

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

Browse all earnings call transcripts

Q1 2027 Telkom SA SOC Ltd Earnings Call

Request TrialDemo

Telkom

Earnings