Primaresearch - Telkom SA SOC Ltd. (123M) Telkom (TKG) - Disrupt and Conquer

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Primaresearch

Ian Brink

EUR 173.18 For Business Accounts Only

Telkom (TKG) - Disrupt and Conquer

Telkom produced a poor set of results in 1H18 with HEPS declining by 7.4% y-y to ZAR3.04. This however beat our and market expectations by 12.6% and 11.4%, respectively.

Poor top-line growth of -0.6% y-y resulted from the impact of weaker business sentiment on private and public sector spend.

We are concerned that some of the longer-term economics of the business are not stacking up – high reliance on voice and declining fixed access lines, less than parity substitution of ADSL with fibre and the dilutive impact of substituting high margin legacy technology with lower margin new generation technology.

Despite our concerns, we take comfort from the impressive pipeline of disruptive price-plans and products which have started to exploit Telkom’s converged capabilities and extract maximum utility from declining services. This disruptive strategy has underpinned mobile growth beyond our expectations and could stimulate the consumer fixed broadband data segment as well.

07/12/2017 17 EN

Underlying

Telkom SA SOC Ltd.

Telkom SA SOC is a technology company. Co.'s services and products include: Fixed-line retail voice services to post-paid, pre-paid and private payphone customers; Fixed-line customer premises equipment rental, sales and services both voice and data needs; Interconnection services; Fixed-line data services, including domestic and international data transmission services; Data center operations which includes e-commerce, application service provider, hosting, data storage, e-mail and security services; W-CDMA, a 3G next generation network; Mobile communication services, including voice services, data services and handset sales and; Other services including directory services.

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ZAE000044897 Johannesburg Stock Exchange South Africa

Provider

Primaresearch

Primaresearch is an independent, sell-side, equity research firm based in Cape Town, South Africa. We focus our research on consumer-facing companies as we have credible experience in this space. The name “primaresearch” invokes both high quality (prime) as well as “primary” research – being novel and offering value-add investment insights for our clients.

Our Vision

Our vision is to be the leading independent sell-side research firm in Africa. While we start with South Africa, we are looking into providing our clients with comprehensive, Africa-wide consumer-facing company and market research. Africa is poised to emerge as a significant consumer market, for which investors in South Africa and abroad will require thorough research and insights on. We aim to be the “go-to” research firm for these investors.

Our Culture

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Analysts

Ian Brink

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