When Telkom unveils its financial results for the year to end‑March, the headline figure will look spectacular – but the real story lies in the details hidden beneath the splash. The JSE‑listed group hinted last week that headline earnings per share (Heps) from continuing operations could jump 45‑55%, landing between 677.9c and 724.6c, up from 467.5c a year earlier. Management attributes the lift to tighter cost control, lower finance charges after debt reduction and the ongoing payoff from its data‑led strategy. On the surface that reads like a triumph; dig a little deeper and the picture becomes far more nuanced.
Behind the headline, FY2025’s Heps were depressed by roughly R568 million in one‑off charges – a R451 million after‑tax loss on the derecognition of the Telkom retirement fund and R117 million in restructuring costs. Stripping those out shrinks the underlying improvement to around 16‑24%, still solid in a challenging consumer market but far shy of the 45‑plus percent splash that will dominate Tuesday’s news wires.
A second, less obvious base effect comes from the treatment of discontinued operations. Basic earnings per share for total operations – continuing and discontinued – is set to fall 52‑56%, dropping from 1 528c to a range of 679.2c‑735.8c. This dip does not signal a profit collapse; it reflects the unwinding of the gain on the R6.75 billion sale of the Swiftnet mast and tower business to an Actis‑led consortium, which was booked as a discontinued operation in the prior year.
So, what should investors and analysts really focus on once the full numbers are in hand?
Key focus areas for the market
| Metric | FY2025 | Projected FY2026 | Implication |
|---|---|---|---|
| Ordinary dividend | R1.63 per share (plus R0.98 special) | TBD | Signals payout policy and confidence in cash flow |
| Free cash flow | R2.8 billion | Expected higher with lower debt | Ability to sustain dividends and fund growth |
| Mobile subscribers | 25.3 million (Dec) | Full‑year count pending | Volume growth drives data revenue |
| Average revenue per user (ARPU) | R60 prepaid | Trend needed | Balances volume vs value |
| EBITDA margin | 29.1% (Q3) | Target > 27% | Margin expansion may trigger guidance lift |
| Net debt | Reduced from prior year | Continue deleveraging | Lower finance costs underpin earnings boost |
| BCX revenue | –9.3% YoY (Q3) | Turnaround plan under review | Determines whether BCX remains a strategic asset |
The table underlines that dividend policy, cash generation, and mobile metrics will dominate investor conversation. A higher ordinary dividend or a clearer payout roadmap could cement Telkom’s resurgence after a four‑year freeze, while sustained free‑cash flow will reassure the market that debt reduction is more than a headline claim.
The mobile arm remains the engine of growth. With 25.3 million subscribers at the end of December and data users now accounting for 76.5% of that base, Telkom has outperformed rivals Vodacom and MTN, which have wrestled with prepaid weakness. Nonetheless, prepaid ARPU slipped to R60 in FY2025 as the company pushed into lower‑spending non‑metro markets. The trade‑off between subscriber volume and revenue per user will be the litmus test for the data‑led strategy’s durability.
Margins have already shown resilience. The group’s EBITDA margin reached 29.1% in the third quarter, comfortably above the 25‑27% medium‑term range set by management. Should the full‑year margin stay north of this band, the board may feel emboldened to lift its guidance, especially if Openserve’s cheap fibre backhaul continues to bolster mobile economics.
Enterprise IT division BCX remains the group’s problem child. Revenue fell 9.3% in Q3 amid constrained corporate spending, and the retirement of CEO Jonas Bogoshi has left Hasnain Motlekar acting in the role. Stakeholders will be keen to hear the turnaround plan and whether BCX will be retained as a long‑term pillar or earmarked for deeper restructuring.
Openserve, in contrast, has been a quiet workhorse. The fibre arm now serves 1.5 million homes with a connectivity rate above 52%, the highest among South Africa’s major providers. Its role in feeding the mobile network with low‑cost backhaul not only underpins margin expansion but also reinforces the group’s deleveraging narrative – a key factor behind the lower finance charges Telkom cites for its earnings lift.
Strategically, Telkom has become the unexpected outperformer in the South African mobile arena, while speculation about industry consolidation – including a possible tie‑up with MTN – continues to swirl. Any comments from group CEO Serame Taukobong on consolidation, the government’s shareholding or the medium‑term outlook will be dissected for clues about future direction.
The market has already priced in optimism. Telkom shares closed at R62.12 on Friday, roughly 45% higher than the R42 level when the dividend was reinstated a year ago. Tuesday’s release is unlikely to deliver a nasty surprise, but the quality of the earnings beneath the headline will determine whether investors believe the run of outperformance still has room to grow. The real test lies in convincing shareholders that dividend growth can be sustained, even as the broader operating environment remains tough.