S.Africa’s Telkom weighs options to boost tech division

South Africa’s Telkom is considering options to boost its technology division, including a partnership or acquisition, it said on Tuesday, after weaker-than-expected results at the company’s mobile business hit its shares.

Telkom’s technology division, part of its BCX unit, offers information and communication technology services such as cloud computing, cyber security, analytics and network infrastructure to large and mid-sized companies in South Africa.

The business has been under pressure due to sluggish investments by firms hit by the pandemic, global supply chain issues and chip shortages, the company said.

Speaking to analysts, group CEO Sipho Maseko said BCX was exploring options that could bring in new capabilities and skills, and help expand into new markets.

During an interview with Reuters, Maseko said Telkom could also look at acquiring companies in areas where it cannot grow its skills “organically.”

“We may have to complement that, either with local niche acquisitions as an option, alternatively a global strategic equity partnership to help fortify that niche area.”

BCX, which accounts for roughly a third of the company’s turnover, saw its revenue decline by 6.1% to 7.5 billion rand ($498 million) in the six months ended Sept. 30.

Telkom, the third biggest mobile operator in South Africa, posted a 30.4% rise in headline earnings per share (HEPS) to 285.5 cents for the period.

However, its shares dropped around 12% as it reported lower than expected growth of 6.8% in mobile service revenue and 6.1% in mobile data revenue.

Some analysts were also disappointed by an 839 million rand free cash outflow, which compared with an inflow of 211 million rand in the same period last year, although the company said it expected cash flows to normalise in the second half of the year.

($1 = 15.0529 rand)