Telkom SA SOC Ltd Market Update For The Period To December 2020 Call Transcript

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

Question: Peshendren Ardia - Medbank - Analyst : Thanks for the opportunity to ask questions. Congratulations on this trading update, Sipho and team. I've got three quick questions if I can. I know you guys gave year-to-date numbers. But I did some calculations just to look at your quarterly performance. And it looks like your services -- the Group revenue was quite good, up 3.6% by my numbers. I'm just wondering if you'd give me some color on what is driving that. Because I noticed you gave us mobile service revenue, you gave us Gyro, you gave us BCX and Openserve. And mobile service in Gyro seemed like a slight deceleration from the interim numbers. And BCX and Openserve, the declines are pretty much in line with what we were seeing in the first half of the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 08, 2021 / 2:00PM, TKGJ.J - Telkom SA SOC Ltd Market Update For The Period To December 2020 Call So, the only things I think are missing are your mobile equipment revenue and other revenue that forms part of Group revenue. I don't know if you can or are able to give us any color on how did those numbers perform. Secondly -- I mean related to that, I mean, I know Telkom is quite infamous for restatements or are there any of the restatements in the prior periods that will affect the growth rate that I've been calculated? And the last quick one, Sipho, is you did mention your value unlock strategy. Is there any update on timelines for that? Because it seems like now that MTN is also looking to do its tower deal and it seems to have gotten quicker traction on it than you guys, are you guys able to share with us any timelines on when you plan to give us more information on that? Thanks very much, guys.

Question: Peshendren Ardia - Medbank - Analyst : Thanks very much, Dirk, and welcome.

Question: Jonathan Kennedy-Good - JPMorgan - Analyst : Just wanted to follow up on your free cash flow number and just try and unpack whether there were any significant contributions from working capital as was the case I think in prior periods. Just trying to reconcile the jump in free cash flow that you disclosed. And then, secondly, on the value unlock, would it be possible to give us a sense of how many mobile towers you have that would be included in a potential value unlock transaction? And what the tenancy ratio is on that portfolio at the moment?

Question: Delia Ibragimova - Citi - Analyst : Thanks very much for the opportunity and congratulations with the strong set of results. My question is on -- two questions related to mobile, please. Could you give some indication whether looking at the third quarter [phone trading] in mobile, how does it stack up against the second quarter revenue -- service revenue, so maybe sequentially? And also what are the trends that you are seeing so far in the fourth quarter, whether so far the value is comparable to third quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 08, 2021 / 2:00PM, TKGJ.J - Telkom SA SOC Ltd Market Update For The Period To December 2020 Call And then in mobile EBITDA -- margin performance in the third quarter, perhaps you could give us a bit more detail whether -- why there has been pressure on margin, whether it's -- and you did mention that there were some investments in postpaid. But what are you looking for there year to date? I think you mentioned in the first half that sustainable margin at 20%-25% could retake that as the guidance for where margin would be for the mobile for the year. Thank you.

Question: Delia Ibragimova - Citi - Analyst : Thank you very much. Could I just follow up on the revenue? Looking at the absolute performance in round terms, would it be fair to say that in the peak period peak revenue was in Q3? Sorry, in Q2? Quarter to September?

Question: Delia Ibragimova - Citi - Analyst : Just looking at the absolute revenue in round terms, service revenue and mobile in round terms, Q1 to Q3, would it be fair to say that the peak revenue was in Q2 or the revenue sequentially still is growing in Q3 versus Q2 in absolute terms?

Question: Delia Ibragimova - Citi - Analyst : Okay, thank you very much. And normalization from here -- understood. Thank you.

Question: Vikhyat Sharma - RMB Morgan Stanley - Analyst : I think just two small questions from me. First of all I wanted to know, you've given us 10% EBITDA growth. Are there any kind of restructurings in the base or this base is quite clean? As far as I can remember we didn't have a third-quarter number, but in the second half last year you reported a lower EBITDA because of all the restructuring, etc. So I'm just assuming those are all in fourth quarter are not in the third quarter? And second question, I think more from the perspective of, Sipho, you said that the business is closer to reaching an inflection point with mobile EBITDA growth kind of will outstrip the fixed declines. Are we there yet or is it just probably an impact of COVID that connectivity spends are too high? And how far away from that point we are if you could probably just indicate that? Thank you.

Question: Sunil Rajgopal - HSBC - Analyst : My question is regarding to the upcoming spectrum auctions. Can you please comment about where South Africa is in terms of the transition from analog to digital? And what's your thinking about the likelihood of when the spectrum or the 700 or 800 MHz would possibly become available? And secondly, in terms of the mobile business, how should we be thinking about the future growth part? Is the management confident on maintaining the growth pace that we have seen in Q3? Or will there be some bit of a pullback in those growth rates? Thank you.

Question: Sunil Rajgopal - HSBC - Analyst : Sure, thank you. And if I can just follow up -- another question with -- regarding to the BCX and enterprise segment and also on the open network side of things. So, can you comment about what is the business sentiment around new contracts or new IT projects? Are we seeing a bit of improvement there in terms of sentiments or additional investments? Or will there be a period of lag or the pullback will continue to be there for some time before we see a recovery?

Question: Viyat Jism - Medbank - Analyst : My first question is on mobile data pricing and what you are seeing post the COVID half. Because it looks like -- it's probably expected that your traffic growth has dropped quite a bit in the third quarter, data traffic growth. But at the same time, given the conversions we're seeing in your data revenue growth, it looks like the depth of your price (inaudible) or the amount of promotions you're actually running has also come back quite a bit. So, it'll be interesting to get Sipho's view on what he's seeing in terms of pricing and promotions in the mobile market over quarter three. And then my second question is -- on third-party distribution costs in the mobile segment, (inaudible) fell away quite aggressively in H1. What are we seeing what those distribution costs for the mobile segment in quarter three? Thank you.

Question: Viyat Jism - Medbank - Analyst : The first question was just on -- what are you seeing in terms of pricing and promotions? Because data traffic has come down but you're still monetizing quite well on the data side. So, it looks like the depth of your price caps or your promotions has come down quite a bit as well. I could be wrong, but that's what it appears (multiple speakers).

Question: Delia Ibragimova - Citi - Analyst : One is a follow-up, please, on the working capital. Whether you expect the database to stay stable from here, so you would expect the benefit that you have seen in the third quarter will remain from here? And second question on investment plan. You mentioned that going forward you plan to compete on both mobile and [two hands] on the fiber as well. Does that imply that you plan to accelerate or resume rather investments in fiber? Because so far it seems like the focus has been on mobile. And how do you plan to use this benefit of the working capital release that you have, especially very strong this year, it appears to be much stronger than what you have guided, do you have planned to release -- whether you plan to reinvest that into network, maybe use the benefit of this release to strengthen your competitive position. If you could give us insight on investment plans and the working capital would be helpful. Thank you.