Telkom S.A. SOC Limited

Telkom reported group revenue of just over ZAR 21 billion, or ZAR 21.3 billion, down 1.5% year on year. Group EBITDA increased 1.2% to ZAR 6 billion, with EBITDA margin up 0.5 percentage points to 28.1%. Headline earnings grew 30.4% year on year, while headline earnings per share rose 50.4% to $0.255; basic EPS increased 27.3%, though the exact figure was not clearly stated. Free cash flow was negative ZAR 839 million, versus positive ZAR 211 million in the prior period, and net debt to EBITDA was stable at 1.1x. For the operating businesses, Openserve revenue fell 1.8% and EBITDA rose 11.2%; Swift’s revenue increased 7.3% to ZAR 674 million and EBITDA rose 10% to ZAR 532 million; BCX revenue fell 6% to ZAR 7.4 billion; mobile service revenue rose 6.8% to ZAR 8.8 billion. Management said full-year CapEx is likely to be about ZAR 7 billion to ZAR 7.3 billion, below the previously guided ZAR 8-plus billion, and expects positive free cash flow for the full year, with second-half free cash flow closer to ZAR 1 billion to ZAR 1.5 billion.

Sipho Maseko described the half as “very difficult and tough,” but said the business remained stable and resilient. He highlighted progress in Openserve stabilization, fiber expansion, mobile growth, and the move to unlock value through separations and a SwiftNet listing, while acknowledging ongoing pressure in IT/BCX and a tough trading environment. His tone was cautious but constructive, with repeated emphasis on execution in the second half.

Dirk Reyneke focused on the financial resilience underneath the tougher operating backdrop: EBITDA margin expanded to 28.1%, headline earnings rose 30.4%, and free cash flow should normalize in the second half after a negative ZAR 839 million first half. He attributed the cash outflow to higher CapEx paid, working capital, tax timing, handset receivables, and staff incentives, and noted net debt to EBITDA was stable at 1.1x. He also said annual debt redemptions are targeted at or below ZAR 2 billion, CapEx is now expected at ZAR 7 billion to ZAR 7.3 billion, and management remains committed to reinstating the dividend policy by year-end, subject to the SwiftNet listing, management transition, and other uncertainties.

Analysts pressed management on the lack of medium-term guidance, CapEx, cash flow, and dividend policy. Dirk said it was premature to change the 3-year guidance, but he narrowed full-year CapEx to roughly ZAR 7 billion to ZAR 7.3 billion and said full-year free cash flow should be positive, with second-half cash generation helped by lower once-off outflows. On dividends, he said the board still plans to revisit policy by year-end rather than now, and any value unlocked from separations could be used for balance-sheet repair, reinvestment, shareholder returns, or a mix.