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Welcome, ladies and gentlemen, to the Telkom Interim Results Presentation. My name is Nondyebo Mqulwana. I am the Head of Investor Relations at Telkom. This presentation is the first milestone detailing the delivery of our strategy for becoming the backbone of South Africa. What you'll see in this set of results is that our data-led strategy and execution is delivering real results. We are joined online via webcast by our guests, via Chorus Call, as well as through a live broadcast. In the room, I would like to welcome board members of Telkom, our Group CEO and CFO, the group Exco members, and guests from the investment community, banking community, media, and everyone else joining us in the room. We've got our standard disclaimer, which applies broadly to the oral presentation as well as the entire presentation in place.
If we turn to today's agenda, we are pleased to report a robust set of results, building upon the progress made in the previous year. On the stage, we've got Serame with our Group CEO, Mr. Serame Taukobong, joined by our Group Chief Financial Officer, Mrs. Nonkululeko Dlamini, and they are going to take us through the presentation. First up, our Group CEO, Serame, will give an overview of the business, highlighting key achievements for the first half. Next, he will update us on the continued progress we've made, executing against our strategy, and walk you through the performance of each of the business units and how they've contributed to the group results. After that, Nonku will delve into the financial performance for the period, and Serame will then conclude the presentation, recapping our strategic focus on the outlook section.
Once that is complete, we will then go into our Q&A session, which will take us up to 11:00 A.M. I now hand over to our Group Chief, our Chief Executive Officer, Mr. Serame Taukobong. Over to you, sir.
Thank you, Nondyebo. There's a Swahili proverb that says, "A boat doesn't go forward if each one is rowing their own way." Eighteen months ago, in this very room, we announced a bold decision that we had taken as a management team, as One Telkom, to disrupt our own strategy, to challenge the path that we had embarked, to set a new journey as an Infraco. Today, it pleases me to share with you how we're doing with this journey. Ladies and gentlemen, welcome to our interim results presentation. As Nondyebo has highlighted, the journey is yielding the targets that we've set ourselves for our midterm targets. Our data-led strategy is showing some positive shoots and positive results. Revenue across our key drivers is showing the results of solid data demand.
We have, particularly across key financial intrinsics, started to gear up on the numbers that we set ourselves. Our balance sheet is showing signs of resilience. We have shown significant improvement in our adjusted debt-to-EBITDA ratios. We've shown sustained free cash flow. Equally, continued resilience in de-risking our balance sheet with a successful conversion of our Telkom retirement fund, and Nonku will shed more light on this. We continue with our Smart CapEx investment and executing on the promise of exiting our non-core property assets. A highlight of our financial numbers, and certainly I won't take the shine from Nonku. She will do far more justice than I can. But in key highlights, mobile data revenue and our fiber data revenue continue to be the engines that drive this growth. As I mentioned, our EBITDA margin is showing positive growth, 3.6 points up.
Our debt has been reduced, and our adjusted profit after tax is showing significant growth. The engine behind this growth remains strong fiber and the strong growth in mobile. As Hasnain likes to call it, we continue to punch with both hands, underpinning the Infracos strategy, which is strengthened on ensuring that we meet the high data demands of our country. We are executing on our say-do ratio. We promised to exit out of non-core properties, having successfully executed very well-supported auctions this year, and we will continue to exit properties as we continue to modernize our infrastructure. Our towers' Swiftnet exit met with positive approval from the competition authority. We now await the administrative process from ICASA, which unfortunately has taken slightly long. There are no legal or regulatory impediments. It is just an administrative process. We do hope to get that coming through very soon.
On the ESG front, what is pleasing for us is the integration of renewable energies into our ecosystem, especially in our Bellville and our core hub, where we've integrated quite successfully new solar energy, our investment in empowering communities through SMEs, as well as the ongoing integration of lithium sites into our core network, both in Openserve as well as our consumer backbone. I will touch on the various BUs in slightly more detail. Telkom Consumer. Key for us has been a pivotal milestone for our mobile business. In their new payoff line, possible begins here, definitely living up to that. Having been recently announced as the best mobile provider in South Africa, a monumental accolade for us.
Incredible growth in prepaid, and what's remarkable about this growth, driving high prepaid growth while maintaining a steady output, which I think for many of you who've been in the industry, is certainly, certainly in my many years in prepaid, quite a remarkable feat. Testament to a balance of managing acquisition with retention and a proposition which is driven by our Mo'N ice CVM and retention. A data-led network with a strong 4G and 5G presence, where a significant portion of our subscribers are actually 4G subscribers. Postpaid, very stable postpaid growth with an increase in output, our SIM-only propositions with the new FlexOn also launched, ensuring that we keep a stable but responsible acquisition of postpaid subscribers. Looking more into details that support this, as I mentioned, strong driver being prepaid with a solid growth of data revenue matching the data growth as well.
We did promise to achieve 25% EBITDA by 2025. The mobile team has delivered that, balancing both growth as well as cost efficiency in achieving that. As I said, maintaining a stable prepaid output in the light of growing high prepaid growth. As I've always mentioned, and we've always mentioned, the mobile network is ready for the 2G, 3G migration, and that is where the Telkom mobile team is driving service revenue growth ahead of market trends and has continued so in almost four quarters in a row. What we are seeing certainly, even in the latest numbers, is that trend is continuing. On the Openserve side, as I mentioned earlier, our connect-led strategy is certainly yielding results.
What's also encouraging is that if you look at the contribution of our next generation revenue, we have reached the inflection point where now the revenue is certainly making up for the legacy decline, and we're seeing that in the positive growth of our EBITDA margin. Supporting that, the drives in modernizing our network and the continued focus on cost efficiency also now showing up in how that margin improvement is showing up in the Openserve network. Equally, a big focus on Openserve is the quality of service reflected in the NPS scores that we've achieved, and also our ability to service our customers faster, which is shown in the significant improvement in our time to install, but also in the efficiency in terms of the assurance visits that have significantly decreased. This decrease is actually a positive.
So just to make sure that it's not an accounting decrease, that the less the visits, it actually means a good thing. Right, Althon? Touching on BCX. In BCX, two key things. We have embarked on a journey as one Telkom to ensure that we drive a key reshaping of BCX. The first phase of it was the Section 189. Unfortunate, but it is part of restructuring and reshaping BCX to ensure that we focus on your higher margin and lower cost businesses. And that first phase has been executed with speed. The second part is the IT portion of our business is remaining stable, as you can see in the numbers.
And like I said, it is something that is owned across the entire business, a One Telkom approach to ensure that we reshape BCX to make it more resilient for the future and ensure that we acquire more of the opportunities, leveraging the strengths of One Telkom to gain the rightful footprint that BCX deserves in the ecosystem. Gyro, our properties division, as mentioned earlier, executing on those non-core properties and also contributing quite significantly to our energy efficiency programs across the group. On Swiftnet, not losing focus despite the programs of the sale, continuing to ensure that we maintain the right profitability levels and that it continues to be a significantly positive going concern. I will now hand over to my co-captain, Nonku.
Thank you, Serame. Good morning, ladies and gentlemen in the room, as well as everybody online.
I'll take you through the performance of the business, focusing on the financial elements that are indeed coming from this data-led strategy that we have driven, and indeed we have seen very positive and significantly improved results. So just as a form of a content page, I'll take you through the details of the performance with regards to the revenue and a bit of a breakdown there. We committed to drive cost optimization with a view in the medium term to hopefully get to a level of 75-25 level, and we are still driving that trajectory, and we have seen a significant impact of that process in the cost improvement. We delivered a positive free cash flow number of ZAR 768 million, and I'll give you a bit of details there as well. Then we speak about adjusted numbers and specifically EBITDA.
How we have set up the booklet and these results is that we've got the full operations that are reported in our interim financial statements, but then because we have made significant progress in the Swiftnet asset that is held for sale, and we are indeed waiting for the ICASA outcome, what you will see in our income statement is that the last line is the discontinuing operation, which is basically the Swiftnet item, so a number of slides I will go through will focus on what we call continuing operations, which is basically where we see ourselves going in the next two, three years, and where we are now in H1 in terms of those continuing operations, and really the exclusion there is the Swiftnet, which is held as an asset held for sale.
We will touch as well on the balance sheet, which has shown strong, strong resilience and significant improvement over the period with reduction in debt and improved performance resulting in better net debt to EBITDA. But maybe before I go through the details of the continuing operations, let me just take you through a little bit more detail on this Telkom Retirement Fund work we've been doing in the background. So a while back, we went to the board on the approach of the Telkom Retirement Fund. We requested the board to support a process of moving from a hybrid of a fund that had a bit of a contribution as well as a benefit fund. Now we have moved to solely a contribution fund.
What that does is it totally de-risks the balance sheet because we do not have a need to go through any valuations, actuarial valuation, and assessment of debt of liability with regards to this. And this work continued that we got approval from the FSCA, the Financial Sector Conduct Authority, to do the conversion from the defined benefit fund to a defined contribution fund. This then resulted in us de-recognizing. If you look at our financial year end 2024, there's note 10 in our financial statements. It takes about three pages in the notes, basically to disclose how much is the liability. It always has been fully funded, but the details around the actuarial valuation in relation to that liability. So what this work has done is that we will now de-recognize the liability with regards to the Telkom Retirement Fund.
We will also de-recognize the fully funding asset in relation to that liability in our financial statements. This then, in terms of compliance with accounting standards, had to go through our profit and loss, and the numbers were really at one level, the real valuation of the liability against the asset, which is the ZAR 288 million number, which we had to remove, as well as an element of a payment that we had to make as part of this de-recognition process of ZAR 330 million. So our financial statements, specifically the profit and loss, you will see a ZAR 618 million number. And to further make sure we focus on continuing operations and underlying performance, we show this number as a once-off, not continuing, and that's why we speak about adjusted EBITDA. Then in the last element, it's important to highlight that this process is not affecting our free cash flows.
The payment that we would be making is basically coming from a cell captive that is funding the requirement, and therefore the free cash flow that we'll be talking about is coming from the underlying performance. This is in line with best practice as many entities have gone this route, and Telkom has been working through it. And therefore, as part of our strengthening and ensuring our balance sheet is resilient, we have now moved to this contribution fund, and I think it's a significant milestone to the team that worked tirelessly to achieve this. Now, just to put that into numbers, if you look at our financial performance compared to the previous financial year, we had reported EBITDA, if I start there, of ZAR 4.7 billion. And in relation to the underlying performance, that has grown by 18.3% to ZAR 5.6 billion.
However, as I indicated earlier, there is this TRF de-recognition of ZAR 618 million that we've had to put through the income statement. But also we are continuing with work specifically in the BCX area of restructuring, as Serame indicated earlier, that we continue to work on BCX to improve performance. And one element is related to restructuring costs that we've had to put through. So the areas that we've had to adjust for when we speak about the adjusted EBITDA, it is the TRF recognition element as well as the BCX cost of restructuring. And without those two numbers, then you will see the performance from the underlying businesses being the consumer, the Openserve, as well as BCX. So if you had to reconcile what we call the adjusted number to the reported number, those are the two elements.
And the margins themselves have also been indicated at two levels. The adjusted number, which is basically reflective of underlying performance, is at 26.2%. But if you report EBITDA against reported numbers without taking out these adjustments, the number is then 22.6%. So a few slides I'll go through will focus then on the performance of the continuing operations for a few slides. And to just give a few highlights, we've indeed seen very strong performance and driven by this data-led strategy that we referred to. Revenue is up 1.9%. And again, I'll give you a bit of a breakdown because we are still dealing with some legacy element of our revenue. But where we've driven data and fiber revenues, we've seen significant growth in those areas. I've spoken about EBITDA. And just to highlight another number there, as I indicated, our free cash flow is positive ZAR 768 million.
And we've seen improvement in our net debt to EBITDA, specifically on continuing operations being at 1.3 times. But when you look at reported numbers, again, you will see a 1.5 times number. Now, just a bit of a breakdown on our revenue by stream. Mobile services grew 10%. Fiber-related grew 15%. And in IT services, we saw a growth of 1.9% and overall of 10% growth. However, we still have some legacy element. But if you look as well at the mobile devices and other elements, we've seen some reduction there. And if you look at our revenue overall, 74% contributed by the data-led strategy in the form of fiber and data coming from 68% in the previous year, which is again an indication of the strategy that is delivering.
If I move to costs, we had ZAR 16.6 billion costs, and in the current year, it is ZAR 16.4 billion H1 to H1. Yes, a 2.6% growth. But again, with the work we've been doing in reducing costs, we've seen a reduction of 9% in direct costs, and largely driven by, again, the consumer team focusing on using as much as possible of their own network and therefore a reduction on roaming costs, but as well as the cost of the handset that they've used to drive the sales, a reduction there as well. Also, we have been focusing on ensuring that we improve on our impairment of receivables.
We have not yet seen a significant impact from the economic factors, but the consumer team has been focusing on more stringent vetting processes to ensure that the customers we take in are in a better position to actually pay, and therefore a reduction in the requirement of expected credit losses. We've had to spend money on maintenance, specifically again in the consumer space to deliver the services and other areas, but in terms of the growth in expenses, what we do see is that overall we've grown lower than inflation, and we had given salary increases, which we're also contributing net net, though we have seen a growth that is lower than inflation driven by the cost optimization drive that we've been on.
I've spoken a bit about the EBITDA moving from 4.7- 5.6, but this is just to give a bit of detail: revenue growth, expense reduction, other income largely coming from the sale of properties that Serame highlighted earlier, and therefore a very focused financial discipline across the board in terms of looking for improved revenue, managing costs down, and driving this cost optimization program. So just to pull it together in all the numbers that I've highlighted, you do see revenue reported as well as adjusted numbers on the far right, all the way down to operating profit, which has grown 36.4% on an adjusted basis. Also, with the interest and finance charges, you see a bit of stability and, in fact, coming down from the reduction of debt that we have been driving.
But also, we are hoping that the impact of the 25 basis points that we recently received will show its impact in H2, and as we continue in the financial year, we are expecting to hopefully see better improvement in our interest and finance charges. Overall, therefore, ladies and gentlemen, this is how we deliver 8.3% improvement on an adjusted basis on profit for the period on continuing operations. Just to give a view of this on earnings per share, which is quite an important measure, again, on continuing operations, we are showing headline earnings per share growing 68%, while basic earnings per share have grown 78.9%, but on the right-hand side, just to show the complete picture, we give you a view of continuing as well as discontinuing earnings per share, both basic as well as headline earnings per share, and again, an improvement in both cases.
Now, to deliver improved free cash flow, two elements: improved performance from the business and the EBITDA improvement that we've delivered. But also, we've continued to focus on improving our working capital management. One area that we've given focus in this H1, which we will continue in the coming periods, is the management of inventories. If you look at our business in Openserve, where we've got inventories to support our customers all over the place, we've had to look at the model and rather go to supply and install rather than keeping inventories. And we've seen that delivering improved working capital management. But in BCX, there's been great focus in making sure that collections are improving, and it has contributed to the improvement in collections that you see of ZAR 421 million .
And across the business, we've also managed the accounts payable, including the cost optimization program, which has meant that what we pay to our suppliers is less than we normally would have done and other areas, so this is basically a continuing journey in terms of working capital management while we focus on improving performance in terms of the EBITDA line, which will also continue to deliver and assist with positive free cash flows. If I touch on capital expenditure, a smart CapEx approach, we've seen an expenditure of a total of ZAR 2.7 billion. Total operations, including the Swiftnet amount spent, but largely the expenditure of ZAR 2.5 billion going again to the core operations that are driving the data-led strategy. If you look to the pie chart on the middle there, 38% of our expenditure in this financial year went to the mobile space.
In fact, 48%, while fiber took 38% in comparison to where we were in the previous financial year, and again, you see in that pie chart that the biggest portion is going to the fiber and data space in terms of where we are spending the money, and again, to deliver on this improved fiber to the home picture we see, as well as homes connected in the case of Openserve, as well as increasing the number of sites in the case of consumer to make sure that we have our own network to serve our customers, which has contributed as well to the reduction in the roaming costs. Our balance sheet has been resilient, and we have actually managed debt down. In terms of the net borrowings, we've paid back a total of close to ZAR 900 million.
Our target really is to ensure that at any financial year, we leave with a comfortable maturity level of just below ZAR 2.5 billion. And as you can see, 2025, 2026, and 2027 are within that range. We are working with our funders on the 2028 to flatten that 2028 financial year, and we're quite comfortable that we will be able to deal with that. So in the long term, in line with our financial discipline and keeping the balance sheet resilient, we will keep our maturities as far as possible below that ZAR 2.5 billion mark. And if you look at our liquidity position, we've got interest-bearing debt that has reduced, as well as interest-bearing debt, as well as lease liability that has reduced by 10.1% in total. So that's an improvement that is actually making our balance sheet even more resilient.
We have cash balances of ZAR 3.7 billion, bringing us to a net debt position of ZAR 14.8 billion. So if you look at our headroom, we are having the ZAR 3.7 billion cash as well as undrawn facilities, both committed and uncommitted, a total of ZAR 5.5 billion that we would be able to tap on if we should require any funding at any point in time. With regards to credit matrices and how we manage the funding covenants, we're quite comfortable within the ranges that we have with our debt funders in terms of net debt to EBITDA as well as the interest cover. We've also been watching our fixed to floating rate, and really the range is generally more towards floating than fixed. And it's something we watch continuously for opportunity to either fix and keep flexible.
As the last slide, I am going to take you through the guidance which we have maintained when we have been engaging the markets. We had indicated that this guidance is from 2023 to March 2025, which is the end of this financial year that we are halfway through, but if we look at the performance for H1, again, we are well in line with the guidance that we've given on reported numbers with our revenue streams at 2.1%, as well as basically the EBITDA levels at 2.1%, and in terms of the capital expenditure and the intensity guidance, we are at 12.6, and that represents the total operations as well, and then in the balance sheet, we are at 1.5 times.
We had indicated that we would remain with the 1.9-1.5 times with the view that in the long term, we are going to move towards 1-1.5 times. So we are still on that trajectory, but we are not changing our guidance at this point in time in the period. And I think we are busy internally with our business planning processes. And when we come back with the full year results, we should have finished and we should be clearer. And I think Icasa would have probably given us feedback and we would know where we are going with Swiftnet. And therefore, the new business planning would be determined by where we are with continuing operations. Thank you very much.
Nonkululeko, you got a clap. So we are in good hands. In terms of the outlook, our strategy is not changing.
We are on a journey, as I had indicated. Remain focused on executing against this journey, ensuring that our say-do ratio remains of the highest. It is about smart investing, driving the focus that the two hands are well fed in driving the data-led strategy. It's about leveraging our strengths. We do remain focused on our ambition of being the enabler of not just digitizing telecom, but being the key catalyst of digitizing South Africa through leveraging our infraco strengths in fiber and in mobile, and more critically, in the remaining of this year, maintaining the momentum and ensuring that we continue to deliver this path and the results that we've given. Thank you for joining us, and thank you for your continued support. Back to you, Madam.
Okay. Thank you, Serame. That concludes the presentation by Nonkululeko and Serame.
We will now get into the question and answer session. As mentioned before, we do have people watching us from the webcast as well as conference call. I will first open the floor to questions, and can I ask that please we limit to two questions at a time, and then if there's more time, we will come back to you. Thank you.
Hi, it's Jonathan Kennedy- Good from Prescient Securities. Just wanted to get an update from you on capacity on the mobile network, given the very, very strong growth there, and what is driving the strong uptick in mobile broadband subscribers, and then just a quick one, I noticed there was a payment to Google of about ZAR 1 billion. Just wanted to know whether that's a one-off or whether we should model that in continuing into next year and exactly what that is for. Thank you.
Take it in one word, or do you want to take more questions, or just take one?
Okay. Louise, you had a question?
Hi, everyone. It's Louise Pillay from Investec. Congrats on the results. You mentioned in your presentation that you're maintaining a positive outlook. I mean, does this mean you're expecting accelerating operational trends into the next few quarters? And in a post-GNU world in South Africa, are you seeing more demand for services, consumer services, IT services on the enterprise space? And do you see an upbeat outlook on South Africa in general? And then on the two-pot system, are you seeing any initial impacts on your business, maybe increase in device sales or any sort of increase in consumer activities? Sorry, I'm going to go above the two questions, if I may.
And then on capital allocation, I know you don't necessarily provide an update on returns profile and ROIC, but if you can maybe give us an indication on how's your ROICs progressing, is it tracking in line with your WACC now, any sort of color with regards to that? Thank you.
Thank you, Louise. Do you want to kick off, Nonkul, perhaps, or Serame?
I'll start. So Jonathan, on capacity and mobile, I think we are comfortable because, as we indicated, the key driver behind mobile is our spectrum, number one. Number two, the fact that over 75% of our towers sit on fiber. We will continue to spend more on the core in terms of driving capacity. The driver in mobile, as I indicated in my presentation, is really deep segmented data propositions. So it's a mix across from lower-end packages all the way to high-end.
So it's not usually your big bundles, but it's your smaller denomination bundles, which is the key driver, especially in your prepaid segment. So as your subscribers are moving from 2G entering into the 4G segment, that's where you actually are picking up most of the demand. And that's where the pricing, particularly on prepaid, is at the sweet spot. You can pick up the Google payment.
Yeah, let me just take all the elements from the financials and maybe starting with Louise on ROIC. So what we are working through is indeed improved operational performance, which will improve net profit after tax, one element. Our WACC element is driven by a lot of things, and I think we are looking forward to improved reductions in more basis points going forward, which will hopefully give us an improvement in the debt element.
I think we may not necessarily see a change over quite immediately, but it's quite an area of focus as we work towards the next round of business plans that we are working through. So it's an area of focus, and I think once we've done the new round of business plans, we will be able to see where we're going. And I know it's quite a critical element of improvement. And then with regards to the Google payment, there was indeed a one-off payment that we did receive, but we've got a long-term arrangement in this Google space that will have it's actually a back-to-back arrangement that we're working through. For the lease payment element that we've had to pay over, there is a one-off element, but we can probably give you the details of how it's arranged.
I'll come back to Louise, and we're still on mic.
So the two-pot, we didn't see a significant increase in device sales. So I'm not sure where all that two-pot money actually went to because I don't see an increase in handset sales either, Louise, if I look at the retail sector. But if you look at what the consumer team has done, particularly in devices and mobile, so the ranging has focused more on your lower-end and middle-tier devices, I think in line with what the consumer demand was showing, and focused more on your SIM-only propositions. Where we have seen an increase, obviously, has been in prepaid sales, particularly a bigger uptake in there. And that's across the board from your entry-level propositions all the way up to your high LTE bundles in that regard. So maybe we'll all wait to see what happens in Black Friday sales in that regard.
Consumer services, definitely be seeing a demand, particularly in your SME segment, which is where we are intrinsically focusing. We've created within Telkom a virtual team that's focusing on that SMB sector to drive growth in that. So it's a virtual team across multiple functions, so BCX, Openserve, consumer, working to aggressively focus on that segment here. I think we've covered most of the questions.
Yes, there's one or two more in the room. I think I saw your hand up first, Jono, but the mic is with the lady, so she'll go ahead.
In the front. Yes.
You're not on the mic yet.
Okay, can I go? Sure. Thank you. Greetings, everyone. Sfundo Parakozov from Reuters. So my question is in relation to the Competition Tribunal's decision to block the Vodacom and Maziv merger.
I was just wondering how might that affect your pursuit for investors for your Openserve business, if at all? Yeah.
Let's take one more from Jono.
Yeah, thanks. It's Jono Bradley from Absa. So just on that question on Openserve, maybe just a build on that. Does it change your strategy at all in terms of your rollout plans, how you'll look at that Openserve business over the next, say, three to five years? And then just on the cost side, I mean, we've seen a significant reduction in your roaming payments to other operators. I mean, how much scope do you have to further decrease those, and is that largely tied to whether or not you increase CapEx in your mobile business?
Okay, I'll take both. So I think the Vodacom-MTN deal, in regards to our Openserve decision, has no impact.
I think as we indicated to the market about a good 12 months ago, we had suspended any discussions or investigations into partnerships for Openserve. We stayed very firm on our decisions as an infraco. I think you're seeing the results there. What's critical really for how the market should look at us? The key differential between us and our competitors. Sorry, I'm losing my mic. The key differential between us and our competitors is that we do have the ability, as I said, to punch both. Having the presence of Openserve in our stable is now bearing the fruits of that. So it is a core and critical part of our strategy moving forward. That is how we see it moving forward. In terms of the impact of the decision, we can't tell because we don't know why it was actually stopped.
So until such time that we get the final decision on that, we can't comment. In regards to roaming, it is a combination of two things. Yes, the CapEx that we're investing, the smart CapEx, means that we can carry more of the traffic on our network. The nature of the roaming agreements allows us to do that because we can then see where more roaming traffic is happening. As a result of that, we are then able to build CapEx or build our own infrastructure in relation to where we see increased roaming traffic. So that's the dynamic nature of the roaming agreements that we have. And that's how we've been able to carry more traffic and therefore reduce the impact. Now, we will never be roaming free, as we've always said.
There are areas where we will rely on roaming, which is obviously in outlying areas. But where it's core to where the bulk of our customers are sit, we will build our own network. So it's a nice balance to have.
Thank you, Serame. I'm now going to check with Judith on Cora's call. Were there any questions waiting there?
Yes, we do have a question. The question we have is from Nadim Mohamed of SBG Securities. Please go ahead.
Good morning, everyone, and well done on an excellent set of results. Just two questions from my side. Just following up from Jonah's question, and we've seen substantial margin improvement in mobile on my numbers, and they might be wrong, from 26.8% in the last quarter to 27.7% this quarter. Could you give us some sense of what drove that?
Was it purely about roaming costs for the other contributors, or was it substantial operating leverage? And then secondly, just seeing that next generation is now increasingly a bigger proportion of your revenue, I mean, over what time horizon would you expect your top line to start accelerating from the sort of low single digits that you're achieving right now? That's all. Thank you.
I think I picked up a bit on mobile margin. Is it? Yeah. So I think if you look at mobile, it's a combination of both. It is the revenue growth, that's one. And two, it is also the cost balance. So yes, roaming played a role in that, but also critically, it is the growth in revenue and the mix. If you look at what the guys have been doing, particularly in the cost of sales in prepaid and margins, etc.
So it's a balance of driving those efficiencies to get to that target of 25 by 25, and we're pushing them for more. So it's not stopping at 25 by 25, but saying, how can they be more efficient as they grow? In the NGN, particularly for the top line growth, I think, yes, now NGN over 80% of the revenue contribution. It is that balance of prudent external revenue growth. We have continued to pass homes, but it is efficient homes passed, maintaining that connectivity ratio closer to 50% and trying to get the guys to be above 50%, and the mix of also enterprise growth as well.
So I think at that line, we should see that top line growth now going towards the double digit, but right now, it's balancing, exiting that legacy growth, and ensuring that enterprise and carrier, as well as your homes passed, match up that legacy decline. Hope I've covered you.
Thank you, Serame. Yes, you have them. I've got a couple of questions from the webcast, largely for you, Nonkul. There's just two which need clarification around the impact on cash flows. The first one is from Presh from Nedbank. He wants to clarify if there will be no cash outflow from moving from a defined benefit to a defined contribution plan. The second one is from Myron from MIPF, and he says, "Well done on improving the free cash flows.
Are there any more list liability payments related to Google we should be aware of?"
Thank you. On the Telkom retirement fund, there is indeed no cash flow impact in the Telkom financial statements. We have the ZAR 618 million has got two elements. One is the ZAR 288 million, which is the valuation of the difference between asset and liability, and it is really just a movement of a debit and a credit out of the books of Telkom. The second element being ZAR 330 million is a cash payment. However, the payment is coming from a cell captive, but on the basis that it is part of this transaction, it comes through our financial statement, so it's an in and an out, really, and no cash impact in the free cash flow of Telkom.
With regards to the Google transaction, and as I indicated, it is a back-to-back contract with the revenue element and the payment element that will go over the period of the loan. And we would be comfortable to give the detail on how the modeling of that can be done. So there were ones of payments and receipts, and in the long term, then you will have inflows from the contract arrangement and outflows from the very contract arrangement in the way that the contract is set up.
Thank you, Nonkululeko. Just an update on the Swiftnet deal, Serame. There's a question from Mehdi from HSBC. He wants to understand when we expect to close the Swiftnet deal.
Yep. As I'd indicated, it really is an administrative process in ICASA. There's no legal constraints.
It's certainly just transferring the name from Telkom to the seller, and we are just awaiting for that process to complete. We are hopefully trying to close it before the end of this financial year.
I'm just going to check one last time in the room if there's any further questions for Serame and Nonkul. Okay, there's nothing further. I'm going to pose the last two questions to you, Serame, and they relate to Openserve and mobile, so feel free to shift them to the ops. On Openserve, well done on the rollout. It's a question from Myron again, MIPFA. What is the average cost of passing a home in the last six months? The second question relates to mobile. Well done on the market share gains. What is the cost of roaming as a percentage of revenue in H1 25?
I can pass them on.
Can we get a mic for Althon, please?
I'm not sure, actually, if the CEOs are willing to pass those details. I can tell you that the cost of roaming as a percentage of revenue has reduced from high double digits when we first started this project to low single digits. So that's as far as I can go. I know Hasnain has given me a very bad idea because in the middle of roaming negotiations. In terms of the cost of passing a home, Althon has given me a very ugly eye, so I'm not privileged to give that number because that is his operational differentiator. But those costs have reduced almost by 75% since we started rolling out fiber.
Thank you. That concludes our Q&A session. I'm just going to hand it over to you, Serame, if you have any final closing comments for everyone. Sure.
Yeah, I think in terms of where we are, thank you, Nonkul. It would be amiss of me not to thank the team here present and the team back at the ranch. It has been a journey, as I indicated, that we embarked on 18 months ago, and most importantly, it's been a team that it's a journey that we have embarked on as one Telkom, firmly believing in one, challenging ourselves, disrupting the way that we were as Telkom, on the realization that the path that we were on had to change. It was a tough call that we made, but I think the resilience that is Telkom has shown through. We're not there, but we will continue on this path, and once again, we thank you for your continued support. Have a wonderful day.