Our opinion on the current state of TELKOM(TKG)Telkom (TKG) historically served as the government-controlled provider of fixed-line telephone services in South Africa. With the rise of mobile networks, Telkom was compelled to subsidize competitors like Vodacom, MTN, and Cell-C through termination rates, which have since been phased out. Over two decades, Telkom CEO Sipho Maseko estimated that these subsidies amounted to R70 billion. Today, Telkom remains 41% government-owned, with an additional 11.9% held by the Government Employees Pension Fund (GEPF), though it operates as an independent entity divided into five divisions:
1. **Open Serve**: South Africa's largest wholesale connectivity provider.
2. **Telkom Consumer**: The leading supplier of broadband internet, with a growing mobile network.
3. **Yellow Pages**: Advertising and marketing services for local businesses.
4. **BCX**: An ICT solutions company operating in Southern Africa.
5. **Swiftnet**: Formed in 2018 to house Telkom's masts, towers, and property interests. In March 2024, Telkom sold Swiftnet for R6.75 billion to reduce debt.
Telkom's shift from fixed-line to mobile connectivity is a central aspect of its restructuring efforts. In its results for the six months to 30th September 2024, Telkom reported a 1.9% increase in revenue but a 1.8% decline in headline earnings per share (HEPS). The company attributed its performance to "next-generation broadband offerings," supported by continued investment in its networks.
Technically, Telkom's share price fell from highs of around R98 in June 2019 to approximately R15.00 in March 2020. Since then, it has been moving sideways and downwards, but the latest results have triggered a new upward trend. However, the company carries high debt levels relative to its market capitalization, which poses a risk for investors.
In our view, while Telkom faces challenges in navigating a difficult economic environment and stiff competition, its strategic investments in broadband and the sale of non-core assets like Swiftnet are positive steps. The company is gradually finding a new direction, but it remains a risky investment due to its debt and competitive pressures.
TKG trade ideas
Our opinion on the current state of TELKOM(TKG)Telkom (TKG) was historically the government-controlled provider of fixed-line telephone connectivity in South Africa. With the advent of cell phones, Telkom had to subsidize the development of its own competition in the form of Vodacom, MTN, and more recently, Cell-C. This subsidy was primarily through termination rates for calls, which are now being phased out. Over the past twenty years, Telkom's CEO, Sipho Maseko, has stated that Telkom has effectively subsidized other networks to the tune of R70bn.
Currently listed on the JSE, Telkom is still partially government-controlled, with the government owning 41% and the Government Employees Pension Fund (GEPF) owning 11.9%. Despite this, it operates as an independent organization divided into five divisions:
1. Open Serve: South Africa's primary supplier of wholesale connectivity with the country's largest network.
2. Telkom Consumer: The largest supplier of broadband internet connectivity with a growing mobile phone network.
3. Yellow Pages: Provides advertising and marketing to local businesses.
4. BCX: An ICT solutions company operating in Southern Africa.
5. Swiftnet: Formed in April 2018 to house Telkom's masts, towers, and property interests. Swiftnet owns a diverse portfolio of 1,330 properties, with 40 earmarked for development.
Telkom is also impacted by the rulings of the Independent Communications Authority of South Africa (ICASA) regarding "inter-connect" fees. However, Telkom has been well-managed, and its downsizing efforts are expected to improve profitability moving forward. The company is steadily transitioning from fixed-line to mobile services.
On 23rd July 2021, CEO Sipho Maseko announced his intention to step down, effective from 30th June 2022. On 22nd March 2024, the company announced the sale of Swiftnet for R6.75bn to a consortium of investors, with the cash intended to reduce Telkom's debt.
In its results for the year ending 31st March 2024, Telkom reported group revenue up 1.6% and headline earnings per share (HEPS) up 201.3%. The company stated, "Total headline earnings per share (HEPS) and basic earnings per share (BEPS) increased by more than 100% to 376.0 cents and 385.5 cents, respectively, driven by improved operational performance. Profit for the year also increased by more than 100% to R1.9 billion, boosted by the non-recurrence of once-off restructuring costs and lower depreciation, while higher interest rates increased net finance costs compared to the prior year."
In a trading update for the three months ending 30th June 2024, the company reported revenue up 3.9% and EBITDA up 24.1%. The company noted, "Telkom had a good start to the financial year with pleasing performance on the top line benefiting from our data-led strategy and compelling value propositions."
Technically, Telkom's share price fell from highs of around R98 in June 2019 to levels around R15.00 in March 2020 and has been moving sideways and down since then. The company has high debt levels compared to its market capitalization, which makes it risky for investors. While the latest results are positive, Telkom is still battling to find a new direction in a very difficult economy and against stiff competition.
Our opinion on the current state of TELKOM(TKG)Historically, Telkom (TKG) was the government-controlled provider of fixed-line telephone connectivity in South Africa. With the advent of cell phones, Telkom was forced to subsidize the development of its own competition in the form of Vodacom, MTN, and more recently, Cell-C. This subsidy takes the form of termination rates for calls, which are now being phased out. Over the past twenty years, the CEO of Telkom, Sipho Maseko, says that Telkom has effectively subsidized other networks to the tune of R70bn.
Telkom is currently listed and is owned 41% by the government and 11.9% by the Government Employees Pension Fund (GEPF) - so it could still be considered to be government-controlled. In reality, it operates as an independent organization divided into 5 divisions. (1) Open Serve is South Africa's primary supplier of wholesale connectivity with the country's largest network. (2) Telkom Consumer is the largest supplier of broadband internet connectivity with a growing mobile phone network. (3) Yellow Pages provides advertising and marketing to local businesses. (4) BCX is an ICT solutions company operating in Southern Africa. (5) Swiftnet was formed in April 2018 to house Telkom's masts, towers, and property interests. Swiftnet owns a diverse portfolio of 1,330 properties and has 40 earmarked for development.
Of course, Telkom is impacted by the ruling of the Independent Communications Authority of South Africa's (ICASA) decisions regarding the so-called "inter-connect" fees. However, in our opinion, Telkom has been well managed, and its downsizing should result in improved profitability going forward. This company is steadily switching from fixed-line to mobile.
On 23rd July 2021, the CEO, Sipho Maseko, announced that he would be stepping down with effect from 30th June 2022. On 22nd March 2024, the company announced that they had sold Swiftnet for R6.75bn to a consortium of investors. The cash will be used to reduce Telkom's debt.
In its results for the year to 31st March 2024, the company reported group revenue up 1.6% and headline earnings per share (HEPS) up 201.3%. The company said, "Total headline earnings per share (HEPS)1,4,7,8 and basic earnings per share (BEPS)1,3 increased by more than 100% to 376.0 cents and 385.5 cents, respectively, driven by improved operational performance. From a loss position in the prior year, profit for the year also increased by more than 100% to R1.9 billion1,3, boosted by the non-recurrence of once-off restructuring costs and lower depreciation, while higher interest rates increased net finance costs compared to the prior year."
Technically, Telkom's share fell from highs of around R98 in June 2019 to levels around R15.00 in March 2020. It has been moving sideways and down since then. The company has high debt levels compared to its market capitalization, which makes it risky for investors. In our view, this company is battling to find a new direction in a very difficult economy and against stiff competition, but the latest results are positive.
Our opinion on the current state of TELKOM(TKG)Historically, Telkom (TKG) was the government-controlled provider of fixed-line telephone connectivity in South Africa. With the advent of cell phones, Telkom was forced to subsidize the development of its own competition in the form of Vodacom, MTN, and more recently Cell-C. This subsidy took the form of termination rates for calls which are now being phased out. Over the past twenty years, the CEO of Telkom, Sipho Maseko, stated that Telkom has effectively subsidized other networks to the tune of R70bn. Telkom is currently listed and is owned 41% by the government and 11.9% by the Government Employees Pension Fund (GEPF), so it could still be considered to be government-controlled. In reality, it operates as an independent organization divided into five divisions:
1. **Open Serve**: South Africa's primary supplier of wholesale connectivity with the country's largest network.
2. **Telkom Consumer**: The largest supplier of broadband internet connectivity with a growing mobile phone network.
3. **Yellow Pages**: Provides advertising and marketing to local businesses.
4. **BCX**: An ICT solutions company operating in Southern Africa.
5. **Swiftnet**: Formed in April 2018 to house Telkom's masts, towers, and property interests. Swiftnet owns a diverse portfolio of 1,330 properties and has 40 earmarked for development.
Telkom is impacted by the rulings of the Independent Communications Authority of South Africa (ICASA) regarding "inter-connect" fees. However, in our opinion, Telkom has been well managed, and its downsizing should result in improved profitability going forward. The company is steadily switching from fixed-line to mobile.
On 23rd July 2021, CEO Sipho Maseko announced that he would be stepping down with effect from 30th June 2022. In its results for the six months to 30th September 2023, the company reported revenue up 2.5% and headline earnings per share (HEPS) up 46.7%. The company said, "Profit for the period was boosted by lower depreciation charges and growth in EBITDA, while higher interest rates materially increased net finance costs compared to the comparative period."
In a trading update for the three months to 31st December 2023, the company reported revenue up 2% and EBITDA stable at R2477m. The company said, "Our cost-reduction initiatives also contributed to improved operating EBITDA as they partially offset inflationary increases, increased bad debt provisions and the added cost of load shedding."
In a trading statement for the year to 31st March 2024, the company estimated that normalized HEPS would increase by between 195% and 205%. The company said, "Growth in earnings has also been positively impacted by lower depreciation and write-offs in FY2024 after asset impairments recognized in FY2023. This growth was partially offset by higher net finance charges and foreign exchange and fair value movements in FY2024."
On 22nd March 2024, the company announced that they had sold Swiftnet for R6.75bn to a consortium of investors. The cash will be used to reduce Telkom's debt.
Technically, Telkom's share fell from highs of around R98 in June 2019 to levels around R15.00 in March 2020. It has been moving sideways and down since then. The company has high debt levels compared to its market capitalization, which makes it risky for investors.
In our view, this company is battling to find a new direction in a very difficult economy and against stiff competition. Despite efforts to improve profitability and reduce debt, Telkom faces significant challenges that make it a risky investment. Potential investors should be cautious and consider the company's high debt levels and the competitive landscape.
Our opinion on the current state of TKGTelkom (TKG) has undergone significant transformations since its days as the government-controlled provider of fixed-line telephone connectivity in South Africa. The advent of cell phones forced Telkom to subsidize the development of its competitors, resulting in substantial financial burdens. CEO Sipho Maseko noted that Telkom has effectively subsidized other networks to the tune of R70 billion over the past two decades.
Currently listed, Telkom operates independently, divided into five divisions:
1. Open Serve: South Africa's primary supplier of wholesale connectivity.
2. Telkom Consumer: A leading supplier of broadband internet connectivity with a growing mobile phone network.
3. Yellow Pages: Provides advertising and marketing services to local businesses.
4. BCX: An ICT solutions company operating in Southern Africa.
5. Swiftnet: Formed to manage Telkom's masts, towers, and property interests.
While Telkom faces challenges related to regulatory decisions on interconnect fees by ICASA, it has been well-managed, with downsizing expected to lead to improved profitability. The company is transitioning from fixed-line to mobile services.
The resignation of CEO Sipho Maseko and plans to list its property and towers division separately as Swiftnet were significant developments. However, the listing was postponed due to market conditions, including the war in Ukraine. The company also faced investigations into the sales of Iway Africa and Africa Online.
Various acquisition offers, including a R7 billion bid for the government's stake and CEO Sipho Maseko's consortium's proposal to acquire 35% of Telkom for R12 billion, demonstrated interest in the company.
In its financial results, Telkom reported revenue and headline earnings per share (HEPS) growth for the six months ending September 30, 2023. Lower depreciation charges and growth in EBITDA contributed to profit, despite higher interest rates increasing net finance costs. The company's revenue and EBITDA remained stable in the following quarter.
The announcement of the sale of Swiftnet for R6.75 billion to reduce Telkom's debt was a significant development. However, Telkom's share price has experienced volatility, falling from highs in June 2019 to lower levels in March 2020. The company's high debt relative to its market capitalization poses risks for investors, indicating challenges in navigating the difficult economic landscape and stiff competition.
Our opinion on the current state of TKGTelkom, historically the government-controlled provider of fixed-line telephone services in South Africa, has undergone significant transformations in response to the telecommunications industry's evolution. The advent of cell phones prompted Telkom to subsidize the development of competitors such as Vodacom, MTN, and Cell-C through termination rates for calls, a practice now being phased out. According to CEO Sipho Maseko, Telkom has effectively subsidized other networks by approximately R70 billion over two decades.
Currently, Telkom is listed on the stock exchange, with the government owning a 41% stake and the Government Employees Pension Fund (GEPF) holding 11.9%. Despite its government ownership, Telkom operates independently, structured into five divisions: Open Serve, Telkom Consumer, Yellow Pages, BCX, and Swiftnet, which manages the company's masts, towers, and property interests.
Telkom's strategic management has been geared towards downsizing for profitability and a shift from fixed-line to mobile telecommunications. The announcement of CEO Sipho Maseko's resignation effective 30th June 2022 marked a significant leadership transition. Furthermore, plans to list its property and towers division, Swiftnet, were expected to unlock shareholder value and provide capital for Telkom's transition to cellular telephony, although this has been postponed due to global and market developments.
Recent years have seen Telkom focused on reducing its workforce and selling assets to streamline operations. The Special Investigating Unit's (SIU) investigation into sales of Iway Africa and Africa Online adds a layer of scrutiny to the company's dealings. Moreover, government's consideration of a R7 billion offer for its stake in Telkom from a consortium called Toto and CEO Maseko's involvement in a consortium aiming to acquire a significant portion of Telkom underscores the ongoing strategic shifts within the company.
For the six months ending on 30th September 2023, Telkom reported a 2.5% increase in revenue and a 46.7% rise in headline earnings per share (HEPS), highlighting improved operational efficiency despite challenges such as higher interest rates and loadshedding. However, the company's high debt levels relative to its market capitalization and the competitive landscape pose risks to investors.
Telkom's share price has experienced significant fluctuations, with a notable decline from highs around R98 in June 2019 to R15.00 in March 2020, followed by a period of sideways and downward movement. The company's efforts to navigate a tough economic environment and stiff competition while seeking new strategic directions highlight the complexities and challenges it faces in the rapidly evolving telecommunications sector.
TKG: trending lower?A price action below 2570 supports a bearish trend direction.
Increase short exposure for a break below 2560.
The target price is set at 2280 (23.6% Fibonacci retracement level).
The stop-loss price is set at 2910 (61.8% retracement level).
The declining channel pattern supports lower highs and lowe lows).
Also remains below its 200-day simple moving average.
Remains a risky trade.
Our opinion on the current state of TKGHistorically, Telkom (TKG) was the government-controlled provider of fixed line telephone connectivity in South Africa. With the advent of cell phones, Telkom was forced to subsidise the development of its own competition in the form of Vodacom, MTN and more recently Cell-C. This subsidy takes the form of termination rates for calls which are now being phased out. Over the past twenty years, the CEO of Telkom, Sipho Maseko, says that Telkom has effectively subsidised other networks to the tune of R70bn. Telkom is currently listed and is owned 41% by the government and 11,9% by the Government Employees Pension Fund (GEPF) - so it could still be considered to be government-controlled. In reality, it operates as an independent organisation divided into 5 divisions. (1) Open Serve is South Africa's primary supplier of wholesale connectivity with the country's largest network. (2) Telkom Consumer is the largest supplier of broad-band internet connectivity with a growing mobile phone network. (3) Yellow Pages provides advertising and marketing to local businesses. (4) BCX is an ICT solutions company operating in Southern Africa. (5) Swiftnet" was formed in April 2018 to house Telkom's masts, towers, and property interests. Swiftnet owns a diverse portfolio of 1330 properties and has 40 ear-marked for development. Of course, Telkom is impacted by the ruling of the Independent Communications Authority of South Africa's (ICASA) decisions regarding the so-called "inter-connect" fees. However, in our opinion, Telkom has been well managed, and its downsizing should result in improved profitability going forward. This company is steadily switching from fixed-line to mobile. On 23rd July 2021 the CEO, Sipho Maseko, announced that he would be stepping down with effect from 30th June 2022. On 21st September 2021 the company announced that it intended to list its property and towers division separately as Swiftnet before the end of 2021. The separate listing is expected to release more than R6bn in shareholder value and will give Telkom the much-needed capital to continue its migration away from fixed line to cellular telephony. The company is looking to cut 1770 jobs and sell its device credit book for R1bn. The company has decided to postpone the listing of Swiftnet because of the war in Ukraine and other market developments. On 26th January 2022 the company announced that the Special Investigating Unit (SIU) had launched an investigation into the sales of Iway Africa and Africa Online. On 12th August 2022 the South African government received a R7bn offer for its 40,5% stake in Telkom from a consortium called Toto. On 30th May 2023 Business Day reported that the CEO, Sipho Maseko, had put together a consortium to buy as much as 35% of Telkom for R12bn. In its results for the six months to 30th September 2023 the company reported revenue up 2,5% and headline earnings per share (HEPS) up 46,7%. The comp [any said, "Profit for the period was boosted by lower depreciation charges and growth in EBITDA, while higher interest rates materially increased net finance costs compared to the comparative period". Technically, Telkom's share fell from highs of around R98 in June 2019 to levels around R15.00 in March 2020. It has been moving sideways and down since then. The company's has high debt levels compared to its market capitalisation - which makes it risky for investors. In our view this company is battling to find a new direction in a very difficult economy and against stiff competition.
Our opinion on the current state of TKGHistorically, Telkom (TKG) was the government-controlled provider of fixed line telephone connectivity in South Africa. With the advent of cell phones, Telkom was forced to subsidise the development of its own competition in the form of Vodacom, MTN and more recently Cell-C. This subsidy takes the form of termination rates for calls which are now being phased out. Over the past twenty years, the CEO of Telkom, Sipho Maseko, says that Telkom has effectively subsidised other networks to the tune of R70bn. Telkom is currently listed and is owned 41% by the government and 11,9% by the Government Employees Pension Fund (GEPF) - so it could still be considered to be government-controlled. In reality, it operates as an independent organisation divided into 5 divisions. (1) Open Serve is South Africa's primary supplier of wholesale connectivity with the country's largest network. (2) Telkom Consumer is the largest supplier of broad-band internet connectivity with a growing mobile phone network. (3) Yellow Pages provides advertising and marketing to local businesses. (4) BCX is an ICT solutions company operating in Southern Africa. (5) Swiftnet" was formed in April 2018 to house Telkom's masts, towers, and property interests. Swiftnet owns a diverse portfolio of 1330 properties and has 40 ear-marked for development. Of course, Telkom is impacted by the ruling of the Independent Communications Authority of South Africa's (ICASA) decisions regarding the so-called "inter-connect" fees. However, in our opinion, Telkom has been well managed, and its downsizing should result in improved profitability going forward. This company is steadily switching from fixed-line to mobile. On 23rd July 2021 the CEO, Sipho Maseko, announced that he would be stepping down with effect from 30th June 2022. On 21st September 2021 the company announced that it intended to list its property and towers division separately as Swiftnet before the end of 2021. The separate listing is expected to release more than R6bn in shareholder value and will give Telkom the much-needed capital to continue its migration away from fixed line to cellular telephony. The company is looking to cut 1770 jobs and sell its device credit book for R1bn. The company has decided to postpone the listing of Swiftnet because of the war in Ukraine and other market developments. On 26th January 2022 the company announced that the Special Investigating Unit (SIU) had launched an investigation into the sales of Iway Africa and Africa Online. On 12th August 2022 the South African government received a R7bn offer for its 40,5% stake in Telkom from a consortium called Toto. On 30th May 2023 Business Day reported that the CEO, Sipho Maseko, had put together a consortium to buy as much as 35% of Telkom for R12bn. In its results for the year to 31st March 2023 the company reported revenue up 0,9% and headline earnings per share (HEPS) down 76,6%. The company said, "The year was characterised by unprecedented levels of loadshedding, constrained consumer spending, and dynamic competition against the backdrop of a sluggish economy with persistent inflationary pressures". The company recorded a loss of almost R10bn during the year which means that it has actually gone backwards since COVID-19. In a trading update for the months ending 30th June 2023 the company reported revenue up 3,8% and Group EBITDA down 4.2% to R2 235 million. In a trading statement for six months to 30th September 2023 the company estimated that HEPS would be between 35% and 45% higher. Technically, Telkom's share fell from highs of around R98 in June 2019 to levels around R15.00 in March 2020. It has been moving sideways and down since then. The company's has high debt levels compared to its market capitalisation - which makes it risky for investors. In our view this company is battling to find a new direction in a very difficult economy and against stiff competition.
Bearish Momentum Continues Telekom
1. Price Formation: The price has broken from an Inverted C&H price formation on a daily chart.
2. Moving Averages: The 7-day moving average (MA) is below the 21-day MA, which is a positive sign indicating short-term bearish momentum.
3. 200-day Moving Average is above the Price.
4. Thus, Mas 7<21<200
5. Relative Strength Index (RSI): The RSI is <than 50, indicating bearish momentum and potential further upward movement.
6. Price Target: 1603 Zcents
TELKOM - 52 Week LowPrice has made a 52 week low and is at previous swing lows.
Failure to hold onto these levels could see the stock target the R16-R18 zone.
The 52-week low in trading refers to the lowest closing price of a stock or any other security during the last 365 days. It’s a technical indicator used by traders and investors to analyze a stock’s current value and predict its future price movement. The 52-week low is often viewed as a support level that traders can use to make trading decisions. If a stock’s price falls below its 52-week low, it might be a signal for some traders to sell.
Telkom Down channel to R15.00 nextDownward Channel has formed on Telkom.
The price continues to make lower highs and lower lows. We can only go with the trend as long as it continues.
So my bias is bearish as there are other momentum indicators confirming downside to come.
200>21>7
RSI<50
Target R15.00
ABOUT THE COMPANY
Telkom SA SOC Ltd. is a leading telecommunications company in South Africa, offering a range of services to both individual and corporate clients.
It was founded in October 1991 when South African telecommunications was deregulated.
Telkom operates in more than 38 countries across the African continent, making it one of the largest telecommunications corporations on the continent.
Telkom offers a broad range of services, including fixed-line telephone, mobile, broadband and fiber optic internet, digital television, and IT services.
Telkom Mobile, formerly known as 8ta, was launched as Telkom's mobile service brand in 2010.
The company has made significant investments in upgrading its network infrastructure to support advanced technologies like 4G and 5G.
Telkom has played a key role in South Africa's broadband expansion efforts, including the rollout of fiber optic networks to homes and businesses.
In 2017, Telkom introduced Telkom LIT, a digital entertainment platform offering video and music streaming services.
It has partnered with other technology and telecommunications companies on various projects. For example, it announced a roaming agreement with Vodacom in 2018.
$JSETKG - Telkom: March 2020 Lows In SightTelkom has been all about wild swings since listing in 2003.
The stock had a decent recovery from the March 2020 lows of 1329 but now the stock seems set to erase all the gains.
Telkom released a trading statement for FY'23 yesterday and the market clearly does not like it.
The strategy is simple, short the rallies towards 1329-1134.
TARGET surpassed Telkom and more downside to comeInv Cup & Handle formed on Telkom.
We then had a break down and the market has been coming down ever since.
200>21 >7 - Bearish
RSI<50
The first target was at R28.63. But the market gapped and opened at R26.00.
This means the price got out at a better price for the short.
The bias is still bearish and we can expect further downside.
I'll let you know in due course.
TKG: counter-testing the declining channel patternA price action above 3400 supports a bullish trend direction.
Trading just below its 200-month simple moving average.
Confirmation of a bullish setup for a break above 3600.
The target price is set at 3700.
Stop-loss set at 3300. Negate the bullish bias for a break below this level.
"Counter-testing" in this context refers to a trading strategy where a trader attempts to take positions that go against the prevailing trend.
Inv C and H on Telkom and strong downside to come to R28 - SMC Inv Cup & Handle formed and broke below the brim level.
200>21 >7 - Bearish
RSI<50
Target R28.63
Bearish bias
We had a BOS up twice before, we had a Change of Character. This means, we go our trend reversal on the bigger time frame, showing downside to come.
This works with the INv Cup and Handle
and because the Daily Bias on the JSE is bearish all confirms strong probability of downside.
TELKOM SA (TKG) H&S LONGH&S formed on Telkom SA.
Looking foe the price to break above the neckline and confirm support above 37.
We could see resistance around the 38 area (200MA.)
Note:
- R35 (20ema) is a key area of resistance
- A 15% cut to the workforce is on the cards
- It is expecting offers for its tower and masts business also by March
- It will be interesting to see how much value Telkom can unlock by selling Gyro and part of Openserve