Telkom's Cash‑Flow Play Beats Vodacom and MTN

Telkom has quietly turned a cash‑flow battle into a market advantage, leaving larger rivals Vodacom and MTN playing catch‑up. Senior Equity Analyst Jonathan Kennedy‑Good of Prescient Securities breaks down the moves that gave the telco a free‑cash‑flow boost strong enough to outshine its better‑funded competitors.

Strategic cash‑flow focus

While Vodacom and MTN rode a continent‑wide recovery, Telkom doubled down on its home‑grown mobile business. The firm trimmed expenses across three core pillars – mobile, fiber and enterprise – and used the savings to slash debt. This disciplined approach restored free cash flow faster than any of its peers.

Key actions that powered the turnaround include:

• Negotiating lower mobile roaming fees, which instantly improved margins.
• Cutting back on loadshedding‑related losses as the power crisis eased.
• Completing the Swiftnet tower sale, unlocking cash and shrinking balance‑sheet risk.
• Driving a sizeable reduction in overall debt, giving the balance sheet room to invest.
• Keeping capital spending tight, only funding projects that promise clear returns.

With those levers pulled, Telkom’s free cash flow surged, beating the average of its listed peers. The analyst notes that many of the easy wins – like the roaming cuts – have already been taken, underscoring that management deserves credit for continuing to execute on tougher, longer‑term initiatives.

To keep mobile revenue on an upward trajectory, Telkom recently followed Vodacom and MTN in raising mobile tariffs. The hikes are framed as a recovery of higher operating costs tied to loadshedding‑induced network stress and a way to safeguard returns on the heavy capital outlay required for network resilience.

Potential upside from consolidation

Beyond the cash‑flow story, Kennedy‑Good flags a second, less‑tangible catalyst: industry consolidation. The Competition Commission, Vodacom and CIVH have negotiated expanded terms for the proposed Maziv transaction, a development that could revive interest from larger suitors.

MTN’s earlier flirtation with Telkom, especially its appetite for the OpenServe fiber network, illustrates how a merger or asset sale could lift the company’s valuation. If a similar deal resurfaces, the analyst believes it could provide an extra boost to Telkom’s stock, adding a layer of upside that investors shouldn’t ignore.

In short, Telkom’s playbook shows that focusing on cash generation, disciplined spending, and strategic asset sales can deliver performance that outpaces bigger rivals. The lingering possibility of a consolidation move adds a speculative yet attractive dimension to the investment case, making the telco a watch‑list stock for anyone tracking South African telecoms.