Leadership reflections on FY2025
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"Telkom's improved performance has laid the building blocks for sustainable financial growth. Further investment in our infrastructure will help us realise the desired returns and expand our reach."
Mvuleni Geoffrey Qhena
Chairperson
Inflationary pressures and geopolitical tensions impacted the global economic environment. How did Telkom perform against this backdrop?
We operated in a tough global economic environment in FY2025. Subdued economic growth due to geopolitical uncertainties and high interest rates significantly impacted consumer spending. The global economy is expected to stabilise, growing at a moderate 2.7% for the next two years1.
The global telecommunications industry was shaped by evolving trends such as the adoption of AI, 5G deployment, Internet of Things (IoT) and FTTH.
The South African economy was constrained by domestic challenges including high unemployment and volatile global commodity prices. We remained resilient and delivered on our data-led strategy despite the challenging macro-economic environment.
Our operational and financial performance improved, including our net debt to EBITDA ratio and positive free cash flow.
Read more about our financial performance in the GCFO's report.
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Telkom concluded the sale of Swiftnet as part of its Value Unlock Strategy. What role did the Board play, and how will this transaction benefit Telkom?
The Board played an instrumental role through the Investment and Transactions Committee, which oversaw the transaction working closely with the Group Exco. We held regular meetings to keep the Board abreast of developments and to ensure we negotiated a prudent deal for Telkom.
The proceeds from the sale have strengthened Telkom's balance sheet by supporting debt reduction and enabled the payment of a special dividend to shareholders.
Going forward, we will focus on creating additional revenue from existing infrastructure assets.
The telecommunications industry continues to shift as technology evolves. What gives you confidence that the PIVOT Strategy is fit to take the Group forward and establish Telkom as the backbone of South Africa's digital future?
The PIVOT Strategy remains relevant, having supported our shift from voice-driven to next-generation revenue in line with industry changes.
Our strategy is anchored by five priorities, namely partnerships, integrated solutions, victory in broadband, operational efficiency, and technology innovation.
One of our key strategic enablers is to monetise our infrastructure assets as OneTelkom. In FY2024, we embarked on the ongoing OneTelkom initiative to maximise our infrastructure capabilities and encourage collaboration across business units. This will enable us to win more business, promote operational synergies and drive capital efficiency.
Read more about our PIVOT Strategy and OneTelkom initiative here.
Telkom has a vast footprint across South Africa, with over 180 000 km of fibre, 7 909 mobile sites and 10 carrier-neutral data centres. This includes our contribution to the country's undersea cable infrastructure. Through our strategic partnership with Google Equiano, we are able to expand our network capabilities and provide innovative products and services to our customers.
We will continue to leverage this competitive advantage and further improve our value proposition.
What were the key ESG matters that the Board monitored this year?
Monitoring our transition and physical climate risks was a key focus. Telkom conducted assessments to understand the financial impact of these risks. The transition risks identified are in the categories of policy/legal, technology, market and reputation. The physical risks identified include flooding, extreme weather, precipitation, temperature, fire and drought. We must manage these risks, as they threaten Telkom's infrastructure and our ability to create value.
The Board continued overseeing initiatives to drive energy efficiency and explore alternative renewable energy.
Read more about our natural capital initiatives here.
Why are technology and innovation key to Telkom's longevity?
Without innovation, we would be unable to remain relevant and competitive. During the current reporting period, the Board established the Technology Committee, which regularly reviews our technology and information strategy. This Group-wide strategy was finalised in FY2025 and is aligned with our PIVOT and ESG strategies to enhance our role in the digital economy.
We invested over R46 million in innovation and industry research and development this year. We continued accelerating innovation in the technology sector through our FutureMakers enterprise and supplier development programme. This involved collaboration with SMMEs to foster strategic partnerships and empower social entrepreneurs in the ICT space.
We fostered a culture of innovation among employees by completing the second year of the Telkom Group Innovation Challenge. This challenge generated solutions that were implemented to improve operational efficiency and drive new revenue.
We invested in start-ups such as AdvannoTech, which develops IoT solutions for deployment in various industries. Through Aions Creative Technology, we invested in Welo Health, a women-owned healthtech platform that connects patients to healthcare and on-demand occupational health services.
What trade-offs are considered in Telkom's capital allocation framework to balance debt reduction, strategic investments and shareholder return?
The nature of the telecommunications sector requires us to make strategic capital investments that will yield profits. Our capital allocation framework considers our business continuity and financial sustainability. We also factor in our capacity to lower debt levels and related expenses.
Returning value to our shareholders requires us to consider both Telkom's long-term financial viability and our capacity to make additional capital investments. Our goal is to be competitive and relevant in our key growth areas, such as FTTH and mobile.
Telkom has declared a dividend of R1.3 billion, comprising an ordinary dividend of R833 million in line with our revised dividend policy, and a special dividend of R500 million enabled by the proceeds from the disposal of Swiftnet.
Strengthening Telkom's succession pipeline and ageing talent at management level are key challenges. How is the Board responding?
We operate in a competitive market in which talent is a scarce commodity. Therefore, we must retain our existing talent. We do this by implementing measures to support, encourage and upskill our people.
Telkom has a robust talent management and succession planning framework to mitigate vacancy risk for the Group. Our succession plans ensure business continuity by placing internal talent in relevant roles, either as full replacements or in an acting capacity as emergency replacements.
We continue to invest in learning and development initiatives to prepare future successors for key roles. This includes our Female Leadership Development programme to strengthen our pipeline of female leaders.
Through the Remuneration Committee, we approved a remuneration strategy scheme to address people risk regarding talent retention and attraction.
The purpose of this scheme is to ensure our remuneration strategy is agile in considering macro talent challenges and aligns with our business strategy.
The scheme structure is underpinned by variable pay to ensure we attract and retain the critical, scarce and core talent we need to achieve our long-term business objectives and deliver shareholder total returns.
Read more in our standalone remuneration report and in the human capital section.
How does the Board ensure that Telkom has suitable skills within the Board, Committees and management to provide robust oversight of its strategy progress and sustainability?
I am confident that our Board Members bring immense value to Telkom. This is reflected in their diverse skills, knowledge and expertise, as well as a balanced mix of gender and age.
The Board has the appropriate combination to guide the business and take Telkom forward. We have a Board development programme that keeps Members abreast of industry and business developments. We prioritise Board and Group Exco succession planning to safeguard Board continuity and sustainability and ensure Telkom remains agile in its operations and decision-making.
We reviewed the composition of the Board this year and made adjustments to some of the Committees. Non-executive Director, Ms Olufunke Ighodaro, was previously a Member of both the Remuneration and the Investment and Transactions Committees. She is now also the Chairperson of the Risk Committee and a Member of the Audit Committee. Her expertise in auditing, risk management and business leadership will bring significant value to these Committees.
In providing strategic oversight, what will the Board prioritise in FY2026?
In the coming year, the Board will pay close attention to:
Telkom emphasises strong stakeholder relationships. Do you have any words of appreciation?
I thank my fellow Board Members for their dedication and support.
This year, we bade farewell to Non-executive Director, Mr Louis Von Zeuner, who retired by rotation from the Board and its Committees. We thank him for his invaluable contribution.
We welcomed Mr Mlamli Booi as a Non-executive Director of the Board and Member of the Technology Committee. He brings key ICT and innovation skills to the Board.
We also welcomed Ms Mandl'esilo Msimang, who joined as a Non-executive Director and Member of the Social and Ethics Committee. She is well versed in public policy and regulation.
I thank the employees, under the leadership of the Group Exco, for their commitment and resilience as we emerged from the section 189 restructuring over the last few years.
I acknowledge the continued trust and support of our shareholders. We are committed to strengthening stakeholder engagement and creating long-term value for our shareholders.
Chairperson
Mvuleni Geoffrey Qhena
