• Productive
    capital

    Performance snapshot

  • Highlights

    Challenges

    Fixed-voice legacy
    business continues
    to decline

    Overall growth
    impacted by a
    weak economy

  • Performance summary

    Gyro performed well, underpinned by revenueenhancement initiatives in the masts and towers portfolio in spite of the challenging macro-economic environment. We remain focused on optimising the masts and towers portfolio as the anchor business for Gyro. We continued with the development planning activities of properties in the pipeline, and identified additional properties that are suitable. We optimised the group’s propertyrelated expenditure.

    Gyro revenue grew by 29.5% to R1 514 million, mainly driven by our masts and towers portfolio. The masts and towers revenue increased by 34.0% to R 1 246 million. The demand for sites by Telkom Mobile and new external leases augmented Gyro’s revenue.

    Underlying EBITDA* increased by 74.7% to R1 197 million and the EBITDA margin expanded to 79.1%, driven by revenue growth and active cost management.

     

     

     

    * Excludes the additional impairment of trade receivables and contract assets as a result of COVID-19.
  • Masts and towers portfolio performance
  • Material trade-offs
    considered in FY2020
    KPIs and key measures
    Masts and towers
    revenue up    		    
    34.0%
    3 648
    600
    to
    R1.2 billion    		 Mature
    towers    		 Sites in the
    new build
    pipeline
         
  • Key strategic focus areas

    Optimise and grow the masts and towers portfolio

    Commercialise the property portfolio

    Enhance building costs and operational at efficiencies


 

Optimise and grow masts and towers

Our productive capital portfolio comprises 3 648 towers, consisting of 1 119 mature towers and 2 529 growth towers. Over and above the productive portfolio revenue growth initiatives, we aim to build 1 000 new towers by FY2023. There are 600 sites in the new build pipeline.

As part of enhancing penetration of 4G and preparation for 5G requirements, we are pursuing small cell opportunities. We went live with the first small cell site with a full service offering to mobile network operators. We believe this plug-and-play solution will be suitable for mobile network operators’ 4G densification and 5G rollout requirements. We started rolling out “in building solutions” to enhance mobile network coverage in commercial buildings. This new initiative enhances our customers’ ability to service their clients and presents new revenue opportunities for Gyro.

Productive portfolio

  •     Growth vs mature towers (%)

  • 1 Tenants/towers
    2 (Tenants + add-ons)/towers

Commercialise the property portfolio

We continue to evaluate individual properties for highest and best use, and for hold or sell investment decisions. Properties core to Telkom's operations are retained and space usage is optimised where feasible. All development projects are based on the best-use approach as informed by the demand and supply dynamics of the particular market. Thirteen properties suitable for greenfield and brownfield developments are under development planning. These projects consist of mixed-use and residential (apartment and student accommodation) opportunities. A further 40 properties with development potential will undergo research assessment to determine best use and suitable development projects.

We continue to decommission, dispose or repurpose non-core properties not suitable for operational use or development. From the 520 sites (equipment, infrastructure, containers and properties) earmarked for decommissioning, 73 were listed for auction during FY2020.

We received offers for a combined purchase consideration of R25.3 million for 46 properties, following auctions that took place in FY2020. Although the properties have not transferred, proceeds from sale are anticipated to flow during FY2021.

The balance of unsold properties will be reoffered to the market, together with new properties that are earmarked for disposal. Current market conditions have made it more challenging to dispose of properties at satisfactory prices; and this will be exacerbated by the negative impact of COVID-19 on the economy. It may be inopportune to dispose of further assets during FY2021. We began the permitting of sites for outdoor media to take advantage of the vast property portfolio to generate alternative revenue streams.

Unlocking value

Property development pipeline – 13 projects

Sectoral spread (capex)		    

Disposal pipeline

Identified disposal properties (73)
   
Enhance building costs and operation efficiencies

We advanced our efforts of consolidating office and warehouse space in major cities. This should reduce property occupancy expenditure across Telkom. Our continuous effort to reduce and optimise utility consumption and related expenditure resulted in savings of R121 million. We implemented initiatives to this end, including electricity tariff assessments, smart meters and data analytics. Through our decommissioning and disposal programmes, occupancy costs are anticipated to further decrease, primarily through utility consumption and utility charges reductions.

Looking forward

The COVID-19 pandemic has undoubtedly changed the way we will do business. However, Gyro will continue to optimise the masts and towers portfolio, and commercialise the property portfolio as feasible during the unfavourable economic environment. We have initiated interim measures amid the COVID-19 national lockdown to allow for the resumption of various projects planned for FY2021. Once the lockdown levels allow for construction to resume, we will resume the tower build programme in consultation with our value chain partners to ensure minimal impact to projected medium-term growth.

We ensure our availability and continued support to our mobile network operators’ customers by continuing to process tenancy application and drive incremental portfolio commercialisation during the national emergency period. We will aggressively permit new sites for anticipated new spectrum, densification for 4G/5G, and penetration of underserviced markets (townships and second tier towns). We continue to roll out the small cell pipeline to proactively provide densification solutions for our major clients.

During this weak economy, we anticipate further decline in the demand for many of the commercial real estate uses as tenants continue to experience depressed revenues. Therefore, we are reprioritising property development planning to property sectors with stable and growing demand for space, and will apply the utmost caution before starting the construction of any project. We will realise proceeds from sold properties and hold the sale portfolio due to very low market prices. Furthermore, we will accelerate the decommissioning of properties due to reduced requirement for workspace and to reduce costs.

We will advance initiatives to reduce property occupancy and operating expenses. We will execute speedily on utility expenditure reduction initiatives to optimise utility costs and consumption by the top consuming properties, facility management costs and rentals for COVID-19 impacted Telkom stores. In ensuring optimal and efficient operation, reopened Telkom buildings have been adequately prepared to ensure building compliance with COVID-19 health guidance and prescripts. We continue to prepare more buildings to be reopened under intensified and compliant cleaning, hygiene and safety protocols as employees resume office work.