The Mobile business continues to drive growth in the Telkom Consumer (Consumer) business. This growth was achieved against the backdrop of an intensely competitive landscape and challenging economic environment. As the overall macro-economic constraints began to materialise, the pre-paid surge slowed as the share of wallet spend plateaued. We continued to grow our pre-paid customer base, with average revenue per user (ARPU) normalising to pre-COVID-19 levels in line with management expectations. In the post-paid consumer market, we grew the post-paid base and maintained high levels of ARPUs. The legacy fixed-line business remains under pressure due to migration from traditional fixed-voice to newer technologies. The impact of the post-pandemic recovery is still evident in small and medium businesses. We remain encouraged by the growth in our non-connectivity/application services which saw double-digit growth in the year under review with a focus on financial services, gaming and content.
Key strategic focus areas
During the current year, Consumer’s revenue remained relatively flat at R25 753 million, with revenue emanating mainly from the Mobile business. Total Mobile revenue increased by 6.3% to R21 415 million, driven by growth in the customer base, data segment and non-connectivity revenue.
This was partially offset by the decline in the legacy fixed-line businesses across the Consumer segment. Our business remains under pressure due to migration from traditional fixed-voice to newer technologies while the SMB segment remains under pressure due to the impact of the post-pandemic recovery. These businesses are in the process of transitioning from voice to data.
Accelerated Mobile growthThe performance of Mobile was achieved against the backdrop of an intensely competitive landscape and Consumer being under pressure. Despite this challenging environment, external Mobile service revenue increased by 3.3% to R17 505 million underpinned by strong customer growth and stable post-paid ARPU.
The customer base grew by 10.5% to 16.9 million at a blended ARPU of R90. This growth was driven by the pre-paid customer base, which grew by 12% to 14.3 million at an ARPU of R66 (FY2022: ARPU at R77). In the post-paid segment, our post-paid customer base grew by 3.4% to 2.7 million with a post-paid ARPU holding firmly at R212.
The Mobile communication services transversal contract1, commonly known as the RT15-2021 contract1 remains an opportunity that Telkom Mobile is pursuing. Key deals have been secured and we are using the RT15 contract to partner with government to reduce technology expenditure while affording them solutions that enable as many citizens and students as possible to access connectivity and technology.
The Mobile business grew its EBITDA by 3.7% to R5 832 million and the EBITDA margin was at 27.2% due to improved cost to serve ratio decreasing to 27.7% compared to 30% in the prior year.
| 1 | A contract entered into by the National Treasury, on behalf of government, for the provision of mobile communication services enabling accessibility to connectivity and technology. |
Accelerated Mobile growthThe performance of Mobile was achieved against the backdrop of an intensely competitive landscape and Consumer being under pressure. Despite this challenging environment, external Mobile service revenue increased by 3.3% to R17 505 million underpinned by strong customer growth and stable post-paid ARPU.
The customer base grew by 10.5% to 16.9 million at a blended ARPU of R90. This growth was driven by the pre-paid customer base, which grew by 12% to 14.3 million at an ARPU of R66 (FY2022: ARPU at R77). In the post-paid segment, our post-paid customer base grew by 3.4% to 2.7 million with a post-paid ARPU holding firmly at R212.
The Mobile communication services transversal contract1, commonly known as the RT15-2021 contract1 remains an opportunity that Telkom Mobile is pursuing. Key deals have been secured and we are using the RT15 contract to partner with government to reduce technology expenditure while affording them solutions that enable as many citizens and students as possible to access connectivity and technology.
The Mobile business grew its EBITDA by 3.7% to R5 832 million and the EBITDA margin was at 27.2% due to improved cost to serve ratio decreasing to 27.7% compared to 30% in the prior year.
| 1 | A contract entered into by the National Treasury, on behalf of government, for the provision of mobile communication services enabling accessibility to connectivity and technology. |
Drive high-speed broadband In our continuous drive to increase the utilisation of and improve the adoption of broadband services, we continue to add relevant adjacent products and services into our mobile and fixed-line portfolios. This is in line with our ambition to see adjacent revenues contribute a greater proportion to our revenues. Our private pricing platform, Mo’Nice, which offers value to our customers based on segmentation and their purchase history, is still a favourite among our customers, particularly in the pre-paid segment. This has grown by 9% year on year, with more than 50% of bundle purchases being completed utilising this platform.
In ensuring that all customers benefit from high-speed, high-capacity broadband that enables them access to digital services, we improved our LTE portfolio and introduced more affordable bundles starting at R49 for the lower-end segments while adding uncapped offers at the higher end. Accordingly, our mobile data revenue grew by 2.9% to R12 563 million. The mobile broadband subscriber base increased by 3.8% to 10.7 million, representing 62.9% of our base that is now using broadband. This growth is incremental to the surge in data demand witnessed previously due to the pandemic.
Our multi-faceted content strategy aims to stimulate broadband usage through our content value proposition, namely TelkomONE and our gaming option. Our TelkomONE offering has shown consistent growth, driven by SABC channels and #OpenUpTheIndustry local content. Telkom VS Gaming is South Africa’s largest independent gaming brand and is the leading local platform for online gaming. In our attempt to enable ubiquitous access to gaming in South Africa, Telkom VS Gaming launched a mobile league within the Telkom Plus platform that provides new opportunities for casual gamers and lowers the barrier for entry into e-sport.
Expand the mobile network The data demand has maintained the high levels established by the pandemic, with our data traffic increasing by 3.3% to 973 petabytes. We continue to strengthen our mobile network by investing in our mobile programme, which was supported by a R2 756 million investment. Consequently, our footprint was extended by 13.7% to 7 313 sites.
The drive to increase network coverage using the provisional spectrum resulted in 840 sites being upgraded, with the temporary spectrum thus giving us a total of 3 092 sites equipped with sub 1 GHz spectrum. The transition from the temporary spectrum to the newly acquired spectrum from the auction will be seamless from a customer perspective as there would be minimal hardware and software changes required.
Roaming in target areas was reduced significantly for areas with new site build and where sub 1 GHz sites were deployed. The acquisition of 20 MHz of 800 MHz and 22 MHz of 3 500 MHz will enhance coverage opportunities and facilitate the deployment of a high-speed 5G network.
Non-connectivity revenue grew by double-digits, with a 13% increase to R827 million in our mobile financial and micro-content services. Our airtime lending book (nano loan business) has advanced a loan book of more than R2 billion. This nano loan business is driven primarily by airtime recharges which now constitute 24% of total recharges with 5.3 million customers using it. This represents an adoption rate of 49.8% of qualifying customers.
Our digital and fintech revenue streams are starting to gain momentum. The products and channels of financial services provide avenues to de-risk our core business, extend sales channels and offer new revenue. With data being at the core, we will maintain a value-driven pricing strategy and offer segmented value propositions.
| 1 | 4.5G is essentially LTE Advanced or LTE Advanced Pro. |
The need for reliable always-on connectivity continues, whether at home, on-the-go or in running a successful business. To address this need, we have created a suite of unlimited products across the mobile, LTE and fixed portfolios that provide unlimited data access. Beyond connectivity, this suite of products responds to the economic crunch that our customers are facing by enabling them to predict and control their month-on-month spend.
The services on the temporary spectrum will be migrated to that of the newly acquired one, where we will have a smooth handover between the two. The rollout of 800 MHz will be expanded to close coverage gaps and improve the quality of service for our customers. Furthermore, we currently have more than 50 5G sites nationally covering 31 towns and cities, and we plan to expand this coverage and launch 5G services in the latter part of Q2.
The 50 sites will be augmented with an additional 129 sites which will be built and completed by the last quarter of this financial year. It is expected that these sites will not only enable our consumer customers to experience high-speed broadband, but they will enable BCX to provide bespoke solutions to Business customers such as mines. We also expect Gyro and Openserve to play a significant role in the enablement of 5G through mast infrastructure and transmission backhaul, respectively.