The economic and operating environment has deteriorated driven by lower commodity prices and a weakening Rand. The outlook remains challenging on the back of lower growth expectations, higher interest rates and rising inflation. Against this backdrop, we prioritised our capital expenditure programme to focus on the growth areas of fibre and LTE. We have extended our debt maturity profile by raising a R1 billion term loan. We remain conservatively geared with a net debt to EBITDA ratio of approximately 0.3 times.
We have made progress in migrating from our legacy to the next generation network and have subsequently seen a slower decline of leased line revenues with growth in data connectivity products and services.
Our mobile business continued to achieve good growth with services revenue up 37% and data revenue up 56% year on year. Our initial expectation that the mobile business would break even by March 2016, has been tempered by the operating environment and cost pressures .We are however confident that we will maintain the current positive revenue growth witnessed in this part of our business.
Excluding BCX, our operating expenses remained flat as we benefitted from our multiyear transformation initiatives. We also made progress on the sale of non-core assets during the quarter.
The results exclude voluntary early retirement and severance packages and includes operating results of our newly acquired subsidiary, Business Connexion (BCX).
|Three months ended 31 December 2015||Year-on-year variance|
|Group net revenue||7,246||up 7%|
|Group operating expenses||4,710||up 13%|
|Group capital expenditure||1,522||up 22%|
|Fixed voice revenue||3,589||down 5%|
|Mobile data revenue||417||up 56%|
|Group net revenue||6,756||down 0.3%|
|Group operating expenses||4,272||up 2%|
We expect continued weakness in the economy and anticipate that our customers will migrate to cheaper packages or delay spending on new infrastructure. We will partner with our customers to contain costs as well take up any opportunities presented by the current environment to grow our business.
This trading and operational update has neither been reviewed nor reported on by the company’s external auditors.
01 February 2016
The Standard Bank of South Africa Limited
Special note regarding forward-looking statements
Many of the statements included in this document, as well as verbal statements that may be made by us or by officers, directors or employees acting on our behalf, constitute or are based on forward-looking statements.
All statements, other than statements of historical facts, including, among others, statements regarding our convergence and other strategies, future financial position and plans, objectives, capital expenditures, projected costs and anticipated cost savings and financing plans, as well as projected levels of growth in the communications market, are forward-looking statements.
These forward-looking statements involve a number of known and unknown risks, uncertainties and other factors that could cause our actual results and outcomes to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. Factors that could cause our actual results or outcomes to differ materially from our expectations, include, but are not limited to those risks identified in Telkom’s most recent annual report, which is available on Telkom’s website at www.telkom.co.za/ir.
We caution you not to place undue reliance on these forward-looking statements. All written and verbal forward-looking statements attributable to us, or persons acting on our behalf, are qualified in their entirety by these cautionary statements. Moreover, unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this document, so that they conform either to the actual results or to changes in our expectations.