TELKOM RETURNS TO PROFIT, BOOSTS DIVIDEND ON STRONGER REVENUE
JOHANNESBURG — South African fixed-line and mobile operator Telkom on Tuesday reported a return to profit in its latest quarter and announced it would raise its dividend payout ratio to 40–60% (from 30%) of normalised earnings. Revenue for the quarter jumped 20% year-on-year to 11.2 billion rand, driven by 19% mobile service growth, helping Telkom achieve a net gain of R290 million after two quarters of losses.
The company said its strong cash generation allowed the higher dividend: at 40% pay-out, shareholders will get roughly 270 cents per share, versus 170 cents last year. Telkom’s CEO blamed previous quarters’ losses on restructuring costs and higher depreciation, so the turnaround reflects a recovery in its core connectivity business. Analysts say the growth comes partly from Telkom’s new entry in mobile voice services and improvements in its fixed-line infrastructure.
Why this matters to South Africa: Telkom’s comeback is a positive sign for the local telecom sector. It means the formerly loss-making network operator is improving competitiveness, which should mean better service or pricing for consumers. More shareholder dividends also suggests confidence in the South African economy. On the flip side, Telkom cited high costs (depreciation and interest) – highlighting SA’s capital-intensive digital rollout. We will analyze how this fits with national broadband plans, and whether Telkom’s gains spur more investment in rural fibre or 5G.
Analysis: Telkom’s return to profit and what it means
1) Mobile lifts fortunes. Telkom’s mobile arm (including subsidiaries like 8ta/Cell C stake) is now key. If mobile revenue continues to grow, Telkom can fund network upgrades. This helps close SA’s mobile coverage gaps, especially in 3G/4G.
2) Debt and costs still a concern. Telkom carries high debt from past spectrum purchases and infrastructure. We will examine if the profit is enough to sustainably service debt, or if more cost-cutting is needed. Any change in interest rates could also bite its earnings.
3) Investor signal. The raised dividend signals that SA’s tech firms can be rewarding. This may improve sentiment toward local shares. However, Telkom’s mixed history means investors will watch consistency of earnings before celebrating.
What’s next
Telkom has guided a normalised (adjusted) profit around R1 billion for the year. Quarterly results on Oct 31 will be key to see if growth sustains. Regulators are finalising 5G spectrum auctions; Telkom’s health could affect how aggressively it bids. Also watch whether Telkom invests its extra cash into expanding services, or returns more to shareholders.
