Telkom Integrated Report 2025 | External themes shaping strategy<PAGETITLE>

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The global and local economy saw lacklustre growth in 2024. It was characterised by what is termed soft landing and lingering effects of high inflation. At least 60 countries held elections in 2024, including South Africa. While some of the political uncertainty levelled off, there is uncertainty about the effects of global trade policy and economic uncertainty stemming from the new United States (US) administration.

South Africa's economic outlook for 2025 is somewhat better, with forecasted GDP growth of between 1.5% and 1.8%. However, underlying pressures on food, electricity and fuel prices may affect inflation. Stronger growth would require improved government spending and fixed private investment along with structural reform.

The rand is expected to remain vulnerable at the end of 2025. However, we believe it may strengthen towards the end of 2025, offering relief for imports of international technology such as network equipment and smartphones.

The outlook for 2025 is positive, promising stronger consumer spending and better performance in several sectors.

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Telkom's operational efficiency improved in FY2025 as loadshedding eased and other operational costs levelled off. We continue to prudently manage costs while balancing maintenance and targeted capital investment.

Future-proofing of networks and quality maintenance on networks and systems will enable Telkom to drive measures to mitigate the impact of adverse
weather-related events.

Further reading: Material themes, strategic risks, and GCFO's report.

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Organisations are adopting digital-first strategies to meet business goals and generate sustainable growth. Cloud computing is catalysing the transformation and modernisation of IT infrastructure, enabling agility and efficiency.

Businesses are looking at a range of private, public and hybrid cloud solutions to manage emerging issues. These include connectivity, interoperability, network resilience, data transfer costs, and the need for open application programming interfaces (APIs).

As organisations transform digitally, cybersecurity risks are becoming increasingly complex and widespread. Adoption of AI, cloud computing and IoT technologies has expanded the attack surface, making proactive security essential.

Ensuring best-in-class connectivity and networking between data centres, carriers, ISPs, businesses and consumers is critical. Operators must deploy future-proof networks incorporating AI, cloud and next-generation technologies like 5G, software defined networks and edge.

Data traffic increased by 31% and 26% for the mobile and fibre businesses respectively. This reflects a healthy appetite for seamless broadband connectivity in South Africa.

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Telkom continues to meet the growing demand for data-led services while driving improved operational efficiencies. We are retiring legacy technologies like 3G and increasing our 5G capability. As we expand our network, we are enhancing coverage by deploying low band (sub 1 GHz) spectrum and increasing capacity by adding multiple-input and multiple-output antennae across our sites. We leverage data analytics and machine learning to predict churn, boost adoption and optimise customer journeys.

Openserve continually upgrades its fibre nodes and forms strategic alliances. It drives cost efficiency through network simplification (consolidating sites and decommissioning legacy systems) and renewable energy initiatives (installing lithium-ion batteries and solar power).

These measures, combined with the upgrade of technologies and infrastructure at central office locations, enable better remote visibility, automation and control of the network.

BCX enhances its solutions to enable clients' digital and cloud journeys. It continues to expand its portfolio of cloud offerings and provide comprehensive solutions to clients through our partnership with Alibaba as an exclusive reseller for South Africa and Africa.

Further reading: Material themes, strategic risks, GCEO's report. and unpacking our PIVOT Strategy.

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While South Africa’s economy is expected to perform better in 2025, the residual effects of higher inflation and lower business confidence will continue to moderate consumer and business spending.

Investments in loadshedding solutions at sites and mobile towers in previous years ensured a quality and reliable network experience for customers.

Across the industry, inflationary price increases were implemented to cover network investments and escalating operational costs.

The ever-increasing need for connectivity is intensifying competition in the industry, with new entrants such as mobile virtual network operators and ISPs emerging. This is driving innovation, particularly in reducing the cost to serve, as service providers strive to penetrate more price-sensitive market segments.

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Telkom aims to maintain its leadership in broadband and data services. In FY2025, we deployed capex to expand our mobile and fixed network coverage, using spectrum acquired in 2022.

The Group continues to deliver innovative, value-driven products that offer maximum value at competitive prices. Together with our data-led strategy, this resulted in above-industry mobile growth driven by data traffic expansion and Mo’Nice, our tailored pricing solution.

Tarifica, an independent global pricing and research firm, ranks Telkom as the leader in high-scoring value plans.

We will continue to drive pre-paid mobile performance through personalisation via advanced data analytics, regionalisation of offerings through the Mo’Town offering, and affordable low-end 4G devices.

The data-led strategy is also evident in the growth of fibre in the fixed services portfolio. Openserve prioritises fibre investment, connecting additional homes and premises with fibre as we pass them.

Openserve also targets more areas with value propositions for lower-income consumers. Its Webstream Prepaid product includes a variety of nationwide pre-paid fibre services in different time-based bundles and data packages. These offer flexibility and affordability for customers who only need fibre at specific times in specific data quantities.

Openserve has launched WebConnect, providing ISP clients with an affordable white label fibre-based internet service that they can rebrand and on-sell.
This is pre-packaged with Wi-Fi connectivity, making fibre services easy to access.

Further reading: Material themes, strategic risks and Openserve.

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We expect ICASA to start preparing in FY2026, with actual licensing or auction of spectrum to occur in FY2027. We expect around 280 MHz of additional spectrum to be made available, including spectrum in the sub 1 GHz and mid-range bands.

A review application was lodged in the High Court regarding ICASA's position on spectrum pooling and sharing brought forward by Vodacom. The interdict to stop current spectrum sharing was not granted. However, the outcome determines the spectrum design process.

ICASA published the final Call Termination Rate Regulations (for fixed and mobile termination rates) on 9 December 2024, effective 1 July 2025. Telkom welcomes ICASA’s decision to phase in symmetrical mobile termination rates. We believe ICASA struck a reasonable balance between enabling effective competition for smaller players and new entrants and fostering a sustainable and competitive telecoms sector in South Africa.

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These regulatory changes support Telkom’s data-led strategy and are positive for market growth in the telecoms sector. The upcoming additional spectrum licensing will enable better 4G and 5G coverage and network quality for customers.

We made positive contributions to the Fair Share discussion on contribution to network costs by large content providers, and to the hearings on policies to support satellite services. We support the principle of a level playing field across the industry.

We uphold the principles of improving service quality, expanding customer options and fostering effective competition. We engage constructively with regulators and policymakers to ensure the electronic communications sector is competitive, supports economic growth and empowers South Africans.

Telkom is well positioned to play a foundational role as enabler of South Africa’s digital future.

Further reading: Material themes and strategic risks

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The global emphasis on climate change continues to intensify. International regulatory frameworks and investor expectations are driving companies toward greater climate accountability.

South African businesses are under growing pressure to decarbonise, driven by increased climate risk disclosure and emission reduction requirements.

While Africa contributes minimally to global GHG emissions, it remains disproportionately affected by climate change, experiencing biodiversity loss, water scarcity and economic disruptions. Aligning with the global goal of limiting warming to 1.5°C is essential for mitigating these impacts and ensuring long-term resilience in African economies.

Many South African companies are accelerating their sustainability initiatives. These include implementing science-based targets, investing in renewable energy and enhancing climate-related disclosures.

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Telkom is refining its ESG strategy in response to the evolving climate imperatives. The Group remains committed to its long-term targets of carbon neutrality by 2035 and net zero emissions by 2040.

In FY2025, we completed our first climate risk scenario analysis.

As we advance our sustainability efforts, we will explore alternative energy sources, integrate renewable energy, and automate climate-related data collection to enhance performance tracking and reporting.

Further reading: Material themes, strategic risks, natural capital and TCFD.

External themes shaping our strategy

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