May 28, 2018 / 6:55 AM / 6 months ago

UPDATE 2-South Africa's Telkom to counter revenue fall with mobile focus

* Headline earnings per share down 18.4 pct

* Full-year results hit by higher tax rate

* To focus more on cyber security solutions (Adds details, stake sale buy govt)

By Nqobile Dludla

JOHANNESBURG, May 28 (Reuters) - Telkom SA will focus on new revenue streams such as mobile and broadband, its CEO said after full-year earnings at South Africa’s biggest landline provider fell 18 percent.

Telecoms groups across Africa face high investments as demand for internet speed and data surges with growing smartphone usage, while some such as Vodacom Group and MTN Group have spent billions on services including mobile money in an effort to gain market share.

However Telkom sees upgrading its technology and adding new and expanding services as the best way to increase revenue.

“They (customers) are not just looking to buy products and devices from us. They’re looking for a lot more things like analytics,” Chief Executive Sipho Maseko said at Telkom’s results presentation on Monday.

Such services include the so-called Internet of Things (IoT), cyber security solutions and big data analytics, which targets large and medium enterprises as well as the government.

Under Maseko, Telkom has also been expanding its mobile business to offset declines in traditional voice services.

“Despite their lower margin compared to traditional revenue streams, the new-generation revenue streams (mobile and data) will ensure Telkom’s long-term sustainability,” Maseko said.

Telkom is investing on migrating customers away from copper based technology to faster technologies such as fibre, LTE and VDSL as customers seek faster internet for richer content.

High speed broadband customers increased 36.4 percent in the year to end-March while overall subscriber growth rose by 30.2 percent and mobile service revenue surged 47.2 percent.

Telkom said headline earnings per share fell to 597 cents from 731.4 cents the previous year, hit by a higher tax rate and labour costs. But it reported better than expected earnings before interest, tax, depreciation and amortisation (EBITDA), which fell by 3.6 percent, while profit after tax declined by 19.2 percent to 3.2 billion rand ($257 million).

Maseko said he was not sure whether the South African government is still going ahead with plans to sell part of its 39 percent stake in Telkom, adding it may not be top of the list as the government may have found other means of supporting struggling state-owned entities.

Telkom declared an annual dividend of 355 cents per share, down 16.3 percent. ($1 = 12.4393 rand) (Reporting by Nqobile Dludla Editing by David Goodman and Alexander Smith)

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