Half Year 2025 Telkom SA SOC Ltd Earnings Call( Q&A Conference) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Thanks for the opportunity to ask some questions. The competition tribunal ruling on the CIVH deal in a bizarre sort of circumstances, it's positive either way they rule in the sense that if they rule positively and allow the deal to go ahead, there are more suitors available for Telkom, including, I mean, potentially MTN can come back. And if they rule against it, then does this not give you an opportunity to get ahead of the competition because your primary competitor in this space is sort of cash flow starved and debt burden in some sense on the fiber to the home and fiber to the base station and so on. So is this not an opportunity, especially since you are seeing some unexpected positive windfalls from things like property. I think ZAR250 million this half and there's potentially ZAR700 million, so let's call it ZAR1 billion. Is it not worthwhile giving that to Althon and let him go a bit wild and build it out while the [20 trend chaps and some are waiting]? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 2:00PM, TKGJ.J - Half Year 2025 Telkom SA SOC Ltd Earnings Call( Q&A Conference)

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Great. Thank you. I'll go back in the queue and see if anybody else wants to ask questions. Thank you.

Question: Preshendran Odayar - Nedbank Corporate and Investment Bank - Analyst : Okay. So yes, congrats on the results. A few questions from me. Staff costs in Gyro was very low in this period, showed ZAR19 million in the results release. Is that right? And why was it so low? Any is there -- what are you -- sorry, what is the run rate we can expect for the rest of the year? And also, there was an amount in Gyro of [ZAR163 million] in other income. If you can just please unpack that. And last question, just on the Google agreement because I've got a few clients asking me questions about this because I remember it being a bit of a prepayment that they had made to you and you had also prepaid for the right to use the -- two of those cable strands. And I think Google is paying for the landing site and services that once it hit South African shores. I don't know -- I mean, without diverging any of the commercially sensitive information. Can you just talk us through the mechanics and the numbers around that? Because I think a lot of guys are getting confused with what you disclosed about the [ZAR1 billion] effect on this. Yeah, that's it for me. Thanks.

Question: Preshendran Odayar - Nedbank Corporate and Investment Bank - Analyst : Yeah. Thanks very much for both those explanations as well on I think a lot of investors are just getting worried about this ZAR1 billion outflow. But I think I also got the just of it. I also remember it being a timing issue. So well done keeping your gearing strong even though you had to check. Yeah, thanks.

Question: Madhvendra Singh - HSBC - Analyst : Yeah. Hi. Thanks for taking my question. I have two questions. The first question is on your plans around dividends. Given such a strong performance, I think, if you could share what is your current thinking? And by when do you think you can start paying dividends again. As well as in terms of magnitude, how should we think about that? And the second question is a very short follow-up. I think I missed that in the morning, but if you could share, what is your current network capacity the utilization on average on your mobile network -- data network? Yeah, thanks.

Question: Madhvendra Singh - HSBC - Analyst : It does. It helps understand the context, but I was still wondering if you think about your own site and given the combination of your fiber to those sites, would you say 50% of the capacity still free on the radio or 30%? Or is there a number you could share on that on average?

Question: Madhvendra Singh - HSBC - Analyst : Okay, great. Thank you very much.

Question: Nadim Mohamed - SBG Securities (Proprietary) Limited - Analyst : To the rest of the team. Congrats on the data. Congrats on the great set of results. Just three questions from my side. Just firstly, in terms of mobile data volume, it definitely seems to be a step-up in Q1 and Q2 to about a [26%] growth year-on-year compared to roughly [20%] prior to that. Just wanted to understand if you can give us some clarity as to what's driving that. I would like to understand that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 2:00PM, TKGJ.J - Half Year 2025 Telkom SA SOC Ltd Earnings Call( Q&A Conference) But secondly, just on beyond connectivity revenue seems to have ticked up quite quickly the 7% of operating revenue for mobile. Just want to understand what are your propositions going forward that you're looking to introduce to your base? And what -- and you see that picking up further from here on? And then lastly, I recall in previous conversations that you mentioned there's a difference in how backhaul is accounting for within your mobile sort of reporting and then if you were to sort of capitalize that, you'd have much higher EBITDA margins. Given the expansion of your margins, I assume that on a normalized basis, that market is now in the mid-30%s or even upper 30%s, more in line with your peers. And that will be a fantastic achievement given your scale. I just want to understand, does your data-led model lend you towards higher efficiencies once you scale up. I would like to understand that if you can add any color, that would be appreciated.

Question: Nadim Mohamed - SBG Securities (Proprietary) Limited - Analyst : Second question, just on your beyond connectivity revenue. I believe it's 7% of operating revenue. I wanted to understand what are the next set of propositions that you're looking at, how are you planning to grow on it going forward?

Question: Nadim Mohamed - SBG Securities (Proprietary) Limited - Analyst : Thank you. And just a comment on that. I mean, your data-led model, I mean, do you think that lends you to better efficiencies than, let's say, the kind of models that your peers are deploying over their own infrastructure? For example, I am just trying to get, do you think there's room to improve on those margins? Or do you think they look pretty tough given the relative difference narrowing quite substantially?

Question: Nadim Mohamed - SBG Securities (Proprietary) Limited - Analyst : Thank you very much.

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Hi, thanks a couple of clarifications and then a couple of clarifications and then a couple of questions. Just a quick clarification. For [non-cul], when you said 40% free cash flow, I might have missed it. Is that operating free cash flow in the sense that it's from your operations rather than any windfall like property transactions included in there or not?

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Sure. Then a question to Serame. You mentioned massive MIMO being switched on. You've given us that 75% of your rands have connection to fiber what percentage of your sites are switched on to massive MIMO at the moment? Can you give us a sense? Is it 50%, is it 30%?

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Right. And is it across the network? Is it part of the network? Is it only in like built-up areas? Just want to get a sense of that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2024 / 2:00PM, TKGJ.J - Half Year 2025 Telkom SA SOC Ltd Earnings Call( Q&A Conference)

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Thank you. And the last one is a question. Your big peers are growing service revenue at 1% to 2% in South Africa and you're growing it at 10%. I mean, is it fair to say you're winning market share? And my question is specifically, do you think you're winning market share across the board or from one particular player? Is it just -- your propositions are just appealing across the board and -- because you seem to be winning good quality customers. I mean, is that also a fair statement to make, given your ARPUs are not diluting like we saw with Vodacom, I think, last year when they put on a lot of subscribers and washed it up again?

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Right. And last question. Are you seeing competition in the fixed wireless access space because some of your peers are monetizing the spectrum they want and starting to show some propositions in the market. So how are you thinking about it? How -- what's the market dynamics there? Thank you. That's it.

Question: Myuran Rajaratnam - Metal Industries Benefit Funds Administrators - Analyst : Well done. Thank you so much and keep up the good work, guys. Great performance.

Question: Preshendran Odayar - Nedbank Corporate and Investment Bank - Analyst : Yeah, thanks guys just a follow-up from the Nadim's question on the margins. I mean you guys did well to achieve your 25% margin before the end of FY25. So -- and I know you did allude to the fact that you don't have much 2G subscribers. I think all your 3G subscribers roam on your -- on the other networks. But where is there -- should I rather ask, is there still room for margin expansion beyond the 20%? Does it normalize back to 25%? I don't know some sort of medium-term guidance for this? Because you're right, your competitors, I mean, they're not really growing much on their top line, but they're still holding firm to the mid- to high-30% margin range. If you can just share some color on what you guys are targeting now beyond the [25 by 25] margin?

Question: Preshendran Odayar - Nedbank Corporate and Investment Bank - Analyst : No, thanks. Thanks very much Serame. Hold on good set of numbers you guys. Thank you.