South Africa’s Telkom resumes dividend payment after 5 years following 62.3% earnings surge

Telkom, South Africa’s telecommunications provider, has announced a 62.3% surge in full-year earnings for the financial year ended March 31, 2025, marking a significant milestone in its ongoing turnaround strategy. The JSE-listed company also resumed dividend payments after a four-year suspension, declaring a final dividend of 163 cents per share and a special dividend of 98 cents per share, totalling R1.3 billion (approximately 72 million) in shareholder returns. 

This robust performance, driven by strong growth in mobile and fibre segments, cost optimisation, and the strategic sale of its Swiftnet tower business, underscores Telkom’s resilience in a competitive and challenging market. However, analysts caution that sustaining this momentum will depend on navigating economic pressures and intensifying competition in South Africa’s telecom sector.

Telkom’s financial results, released today, highlight a transformative year. The company reported a 299% increase in profit, soaring from R1.88 billion ($105 million) in 2023/24 to R7.5 billion ($420 million), with a significant portion attributed to the R6.75 billion ($378 million) sale of Swiftnet to Actis and Royal Bafokeng Holdings in March 2025, which generated about R4.4 billion in profit.

Headline earnings per share (HEPS) rose 44.8% to 545 cents, while basic earnings per share (BEPS) skyrocketed 296.4% to 1,528 cents, reflecting the impact of one-off gains and operational improvements. Diluted HEPS increased by 63.7% to 461 cents, slightly missing Bloomberg’s estimate of 472.6 cents.

Group revenue grew by 3.3% to R43.8 billion, surpassing analyst expectations of R43.5 billion ($2.4 billion), fueled by a 10.2% rise in mobile service revenue and a 10% increase in fibre-related data revenue. The mobile segment saw a 19.5% surge in subscribers to 15.2 million, while the fibre business, led by the consumer-focused Openserve and enterprise-focused BCX divisions, grew by 5.9% and 12.7%, respectively.

Group adjusted EBITDA jumped 25.1% to R11.7 billion ($655 million), with the EBITDA margin expanding by 4.7 percentage points to 26.9%, driven by cost-optimisation initiatives that mitigated inflationary pressures.

Telkom, in a statement, said, “This year’s robust performance and strategic execution allow us to share the fruits of our success with shareholders by distributing both an ordinary and a special dividend. In total, the group will return 1.3 billion rand ($73.28 million) to its shareholders.”

Telkom resumes dividend payment to shareholders

The resumption of dividend payment, a first since 2020 when Telkom suspended payouts to conserve cash for spectrum auctions and debt reduction, signals renewed financial stability. The board’s decision to declare a combined dividend of 261 cents per share reflects confidence in Telkom’s cash flow generation and balance sheet strength.

CEO Serame Taukobong emphasised the company’s “data-centric strategy” and strategic vision to position Telkom as South Africa’s “digital backbone.” The company’s revised dividend policy, targeting 30-40% of free cash flow after capital expenditure, aims to balance shareholder returns with investments in growth.

Telkom’s share price, which has traded in the R20s and R30s in recent years after peaking at R100 in 2019, rose 5.5% to R25 following the announcement, reflecting investor optimism. However, the stock remains volatile, with analysts noting that Telkom’s long-term value hinges on its fibre rollout and mobile business expansion.

Despite the strong results, Telkom faces significant challenges in South Africa’s telecom sector. The decline in fixed-line voice services, which dropped from 56% of revenue in 2013 to 22% in 2019, has forced a pivot to mobile data and fibre. Intense competition from MTN, Vodacom, and emerging players like Rain, coupled with regulatory hurdles and economic pressures such as load-shedding and inflation, continues to strain margins.

Telkom’s strategic reorganisation into an infrastructure-focused company, including divestitures of non-core assets like Swiftnet, aims to streamline operations, but risks remain.

The failed merger between Vodacom and fibre operator Maziv, blocked by the Competition Tribunal, may limit industry consolidation, intensifying competition. Additionally, Telkom rejected a 2023 acquisition bid led by former CEO Sipho Maseko, signalling a commitment to independence but raising questions about its ability to fend off competitors without significant scale.

Looking ahead, Telkom is prioritising investments in its mobile and fibre networks, with plans to explore radio access network sharing to capture high-traffic activity. The company’s partnership with Microsoft to support African expansion and its focus on next-generation technologies like LTE and fibre position it to capitalise on growing data demand. Taukobong reiterated the importance of maintaining a strong balance sheet to fund profitable growth without compromising resilience.

Analysts remain cautiously optimistic, noting that while the Swiftnet sale inflated 2025 earnings, Telkom’s core business shows promising growth. The company’s ability to sustain dividend payments and achieve double-digit earnings growth, as forecasted in June 2025, will depend on execution in a fiercely competitive market. For investors, Telkom’s renewed dividends and strategic focus offer hope, but its long-term success will require navigating economic volatility and outpacing rivals in South Africa’s dynamic telecom landscape.