Ladies and gentlemen, and welcome to everybody who's joined. Welcome to the Telkom SA SOC Ltd annual results presentation. All attendees will be in listen-only mode. A question and answer session will follow the whole presentation. If you should require operator assistance during the call, please signal an operator by pressing star and then zero. Please note that this event is being recorded. I would now like to hand you over to your host, Mr. Serame Taukobong. Please come and meet him.
Thank you for having me, Judith. Greetings all, and welcome to our F24, F25, F25 results presentation. It has been a long day. With me in the room, Nonkulu, our Group Financial Officer, our team, as well as Beauty, still in her role as Chair of Strategy. In 2023, Telkom embarked on a strategy to pursue our vision of serving as the backbone of South Africa's digital future as an infra core. Since then, as One Telkom, we have focused relentlessly on delivering hard results through the clarity of purpose. We reshaped our business to make the most of our strengths. We refocused our leadership and management structure to deliver on our commitments to our shareholders. We set clear goals and key performance indicators for the group and its operating divisions.
Today, our 2025 full-year results demonstrate that the competent execution of our data-led strategy is meeting, and in some cases, exceeding expectations. That is, we still have challenges in some areas. What's encouraging is that now we have a wave of momentum for Telkom to thrive in the complex operating environment ahead. We have good reason to be proud of these results and quietly confident about the future. Some key highlights that we shared earlier on this morning: strong performance, group revenues up by 3.3% to ZAR 43.9 billion, and enhanced our EBITDA growing by 25.1%. EBITDA margin expanded by 4.7 percentage points to 26.9%, a clear signal of stronger operational leverage. Sustained cash generation resulting in ZAR 2.4 billion growth in free cash flow generated. Focus on addressing our debt with net debt to EBITDA reduced to 0.66. We completed a Swiftnet sale and have had cash proceeds of ZAR 6.6 billion.
This was done within the timeline as communicated to the market. The focus on execution and strong performance has resulted in us creating shareholder value through the assumption of dividends of ZAR 2.61 per share. I will now hand over to the operator for questions and answers. Thank you.
Thank you, sir. Ladies and gentlemen, if you'd like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate that you are using the question queue. You may press star and then two to exit the question queue. Just a reminder, if you'd like to ask a question, you're welcome to press star and then one. Our first question comes from Krishandran Odaya of 361. Please go ahead.
Thank you very much. Congratulations on the results, guys. Very good set of numbers. I'm going to try my luck with three questions if I can. I just want to get some understanding on what your sustainable free cash flow generation would be without taking out any—sorry, without taking out any of the one-offs and the adjustments and the property sales. There's a lot of adjustments in the numbers between adjusted and headlines. So I'm just trying to gauge if I had to have a clean set of numbers without any one-off, what would my free cash flow be for Telkom Group? I mean, I'm looking at around—the way I'm calculating is around ZAR 2.1 billion, but Nonkulu, you'd probably have better numbers on that. Then the other two is related to mobile.
I just want to get a sense of what your CapEx intensity or CapEx levels going forward is going to be for mobile. I mean, ZAR 3 billion seems like a little bit, but you managed to still have a very good top-line growth from that ZAR 3 billion of CapEx. If you can give us a bit of guidance of what we can expect for CapEx for mobile in specific in terms of either an absolute number or an intensity. The last one on mobile is I just noticed that staff costs and service fees had massive increases in the year. I think staff costs for mobile went up by 30% and service fees 23%. I mean, can you just share are there any one-offs there or what's driving those increases? Thanks.
All right. First, thank you very much. Maybe let me focus on the free cash flow number. The way we arrive at the free cash flow number, and there's probably—if you look at our slide deck, there are probably two critical slides to be utilized. Slide 27 gives you a sense of the EBITDA number, which is then the starting point when we talk about the free cash flow number. The number we utilize in the EBITDA line is ZAR 11.792 billion, which is likely, or rather, can be rounded up to ZAR 11.8 billion. To just give you a detail of what is in that number so that when you move from there and say, "What is the sustainable free cash flow number?" ZAR 11.792 billion from the EBITDA number is what we call adjusted EBITDA.
It has taken the EBITDA in the financials, taken out the Swiftnet operations because it is focusing on underlying operations and continuing operations. It has also taken off—if you recall when we reported H1, we were closing out the Telkom Retirement Fund transition from being a defined benefit fund to a defined contribution fund. What that meant is that there was an expense we had to pay of about—we called it about just over ZAR 600 million. We have already adjusted that out as a one-off. The number that is in the EBITDA of ZAR 11.792 billion is in relation then to the property sales because we said in that property sales in the EBITDA number, we would have made probably the most significant property sales of about ZAR 654 million in tax in the financial year.
If you take that as probably the only ones of that is in the EBITDA line and then move to your free cash flow details where you say, "If I start with that EBITDA number and then work out from EBITDA to remove non-cash items and bring in working capital and so on," what we are then saying is that the only element that you have to concede going forward is the fact that with Swiftnet now being external, there is this cost that we're going to have to pay, which will form part of the free cash flow calculations going forward because Swiftnet is in future years going to be what we use to eliminate internally is going to be an external cost.
It is largely a clean number as a starting point except that from the property sale, there is an element of EBITDA impact that we have in there. As well, looking forward, we said finance costs are at ZAR 2 billion, and we have now paid as a post-balance sheet event in May or by May because we had April and May, the ZAR 4.75 billion. If you were just to look at that as the reduction in debt, it will have a positive impact in the cost of, let's say, financing costs. That is going to be a positive impact. The way we are looking at guiding free cash flow going forward is to say, "We have this performance of underlying business. We are guiding mid-single-digit growth in revenue.
We are guiding margin expansion over the three-year period. How we are looking at it is an improvement, if you like, on the free cash flow, which will be driven by the performance after catering for all the things I've mentioned. That should probably be the way you look at the free cash flow. It is already a fairly clean number because all these discontinuing operations and so on are already included in the number we are reporting on the free cash flow.
Krish, in terms of the CapEx for mobile, it will, I think, range in the ZAR 2.6 billion-ZAR 3 billion for mobile. I think that CapEx bracket is pretty much where we have come towards. Remember, as I always say, you must look at the CapEx in mobile in two areas. There is the amount that we capitalize, which is in that ZAR 2.6 billion-ZAR 3 billion. Then there is a portion for backhaul, which then sits in the other income, which is another close to ZAR 2.3 billion-ZAR 2.6 billion, which is in what is in OpEx, which is the backhaul that is in charge from OpenServe. We are quite comfortable with that range because remember, they spend the CapEx as they see the demand or the increase or roaming. With the nature of the roaming contract, it then allows us to smartly spend the CapEx.
That we're comfortable with the range of the CapEx. The increase you see in staff is as a result of the good performance from the mobile team. They actually brought in the larger portion of the STIs. That is driven with the large increases then that you see there. It is the bonus that was paid to the consumer team as a result of the good performance that they drove this year. I hope that. Oh, service fees, it is the increase of electricity as well as the growth of the footprint of the mobile network. I hope I've covered you there, Krish.
Yeah. Perfect. Thanks very much, Serame and Nonku.
Thank you. Our next question comes from Jono Bradley of Absa. Please go ahead.
Thanks very much for asking our questions. And congrats on the set of results. Just two from me, please. Just a follow-on from Precious' question. And Nonku mentioned externalized lease costs. Is it possible that you can give us a sense of what that annualized lease cost figure would have been in FY 2025? Had you disclosed the Swiftnet that you started the year? And then secondly, just around Telkom Mobile and the prepaid pricing. So I mean, given that part of Telkom Mobile's superior growth has come from a pricing strategy that offered lower effective rates compared to peers. And how do you view the recent prepaid bundle price increases that now resist discounts? Has this sort of shifted a signal, a shift that the sustainability of Telkom Mobile's current market share is sort of at a sustainable level?
Is it part of a broader strategic shift in response to a changing competitive landscape? Thanks.
Thanks, Jono. I think if we look at the pricing increases, the delta or certainly the gap that we have maintained is still relatively quite robust. The blanket price increases that we've seen, Jono, at headline retail tariff have not actually touched where Telkom Mobile remains quite competitive, which is at your lower-end high-volume bundles. Your lower-end bundles where Telkom Mobile is quite competitive. Firstly, some of those price bundles are where competitors do not even offer propositions. We still remain quite competitive in there. In fact, if you notice the price changes, competition has not even taken price increases in those spaces. We still remain competitive in those because that is where the market sweet spot is at. It is those customers who are quite price-sensitive where we have been quite prudent in how we've managed our price increases based on affordability.
Ladies and gentlemen, please remain online. You seem to have lost the line for the main speaker. Please remain online. Thank you.
Hello. Are we still here?
Yes, we can hear you now. You can go ahead. We lost you a couple of seconds ago.
Perfect. Where did I lose you?
Just around. We haven't touched the price point at the very low end of the market. Competitive.
That's on those prices.
That is where we remain competitive. The price increases that we took were reflective of where our competitors and our customers are looking for the ideal price point. We still remain quite competitive in our prepaid price positioning, Jono.
Nonku, I think that's helpful.
Yes.
Thank you.
Thanks. On the impact of the exit of Swiftnet, in fact, how we've looked at it, Jono, is we would have had, and I think the one slide to use is your slide number 32 in our presentation, where if you look at the 2025 reported continuing headline and in special of 467, which indeed will have a little bit of impact from the property sales that we mentioned. What we have then done is to say, if the Swiftnet impact was built in, there's about 51 cents per share that you would have to see as an impact in 2025. Now, going forward, there will be inflationary impacts that will come in and impact the future outlook on those numbers.
An overall impact is about ZAR 0.51 per share, which is coming from the fact that you do not have the inflows that were external, but also you are taking on the external leases as an expense into your books, which in the previous would be eliminated.
Is that a sort of aggregated impact there? The $0.51 per share is both the lost Swiftnet external revenue as well as the externalized cost impact. Is that an after-tax impact there?
Yes, it would be the after-tax impact.
Okay. Thank you.
Ladies and gentlemen, just a reminder, if you have a question, you're welcome to press star and then one. Our next question comes from Jonathan Kennedy- Good of Prescient Securities. Please go ahead.
Good afternoon. Congrats on your bit of results. Just two questions for me. I just wanted to confirm the EBITDA margin guidance. Is that purely operational? Does it exclude profit on sale of properties? Secondly, just a question on the impairment line. It looks to me as though the impairments are largely in the mobile business, and presumably those will relate to the post-paid revenue line. It just looks to me as though those are quite high as a percentage of post-paid revenue. Is there anything you can tell us about how that's being managed and whether that's going down further?
Right. Maybe let me start with the EBITDA guidance. Yes, Jonathan, it is now us looking at the continuing underlying performance of the business. You may recall that when we met you in the last three or four quarters, Serame has indicated to the market that we are wanting to manage costs in the business through the cost optimization program, but also continue to drive revenue up. That will really be a clean number because the adjusted number has to take out the impact of the once-off if you look at the exit in the investment property, which is not going to continue. We will continue to optimize property and sell some, but never to the extent probably in the near term that we have heard in this financial year.
The guidance we are giving is going to be driven by margin expansion from the continuing underlying business from the three parts, which is consumer PCS. They will all contribute in their various ways because we are looking at this bottom-up. We spoke about mobile continuing to show growth and margin expansion. We spoke about 28 by 28 expectation of the mobile business. As we optimize in the Openserve space, we are driving them towards the 35% level. The PCX, the 12.5 that we are guiding. I think that the impact will come indeed from a continuous cost discipline while we drive for continuing growth. It's important to say cost discipline, not just cost cuts. We need to make sure we're spending in the right places for business growth.
Now, in terms of the second question around the impairment issue, this is an area that we have focused on in the last few years in the consumer space. It will contribute. Maybe Serame, you can start and then I'll end.
Yes. As we've continued to mention, the impairment, you're right, Jonathan, is in the post-paid space. This has come down. I think we're reporting in those areas about 20-odd % due to continued stricter credit vetting. As we've indicated, we're now vetting renewing customers in the post-paid line to make sure that we reduce the risk of that. It has been the team being far more prudent, particularly in how we manage our post-paid customers. Yeah. I hope we've covered you there, Jono. Johan?
Yes, thank you.
Perfect.
Our next question comes from Baron Roderick Ruthman of Lutfa. Please go ahead.
Thank you very much. Well done, Serame. Good set of numbers. I've got a couple of questions. The first one is about you were talking about the roaming arrangement changing further and possibly getting more con roaming as well, if I remember correctly. Can you give us an update on that? What sort of benefits will accrue to you when you and if you do adopt that? That's the first question. Can you also give us a sense of color on the prepaid and post-paid price ups that you're planning or have put in in the last few months? That's the second question.
Lastly, on the fiber-to-the-home side of things, overseas as well as locally, there are some distressed assets, and the business model does not seem to work as well as it did in the past because people are not getting their connection rates up to a level where it can internally fund the growth. Are you seeing distressed-level assets in the market because of this? Thank you.
Thank you, Baron. Mocking testing, the team has now completed. I think they're in the final stages now of finalizing that contract with Vodacom. I think two things. It's definitely continued better utilization of CapEx. We do hope that in the long term, particularly that it does allow us to co-actively utilize both our spectrum. It's really the more we just bring those costs down because the net offset of those shared costs and shared revenues, the net impact of that is to continue driving that cost of revenue to that single digit. Now, as I said, we're getting closer to the low 5%. Are they able to keep it there to manage the increase in the roaming traffic? Pre and post-paid price ups, I think we did indicate the post-paid price up, which we followed the market.
I think that has been pretty much in line with what the market has done. If you look at prepaid, as I answered, I think it was Jono's earlier question, we also followed the market, but we were selective in that the prepaid price up was more in your higher-end LTE propositions, pretty much like all the rest of the competition. We were selective in that where we saw in the price point where our consumers, particularly our lower-end bundles, were more challenged, we did not take significant price increases. FTTH, you're absolutely right. We do see instances of operators under challenge. Our approach in the market, as you've seen, we did continue to increase and pass more homes, but maintained that high connectivity rate. We passed over 200,000 homes, but equally connected over 100,000 homes.
If we actually had to look at the number of homes passed and the number of homes connected in the year, that ratio actually technically is higher than 50% because we continue to go back and look at the homes that were passed previously to ensure that we connect and maximize that connectivity ratio. For us, it's that prudent approach of, as I said, avoiding the spray and cook, but driving that high connectivity ratio without the land-grant type approach. I hope I've covered you there, Baron.
Yes, thank you.
Our next question comes from Nayan Singh of HSBC. Please go ahead.
Yes, hi. Thanks for taking my question. Just to follow up on the impairments, I was just wondering about your views on the credit quality of customers going forward. Are you expecting continued drop in the impairments? This is especially relevant given the macro situation in the country. If you could comment on that. Related with that is, what kind of working capital trends are you expecting going forward? Do you expect any improvements or deterioration? If you could comment on that. Thank you.
Thank you. I think in terms of the impairments, it's a continuous piece of work. As we've said, we've seen a 20% improvement year on year. It's a balance of two things. One, we have matched our devices to affordability of customers. That's the first point. Number two, we've also ensured that our products, in terms of the packaging of our products, are aligned to the device. We will not sell a high-end device with an entry-level price point. That's also important for us to manage the margin and the affordability of the device. Now, obviously, as economic conditions improve, there's a lag in how we see customers behaving. Typically what we're seeing, for example, is that customers are taking longer-term contracts. We were 36-month contracts are more favorable than shorter-term contracts.
Customers are quite wary of their pockets, which is also news that I guess their credit quality is improving with time as customers are being more prudent in their choices. I think that's key for us. Working capital is one of the pillars of our structural cost-cutting initiatives. It is something that we will continue to manage as part of the ongoing projects. As we said, our approach to cost-cutting has not been tactical. We've been looking at long-term structural projects. Working capital cost management is one of the key pillars for that. We will continue to manage that. I don't know if we want to add more.
Yes, absolutely, Serame. I think we've come a long way in getting this improvement. We think we are moving towards the optimal level. We're looking again at each business and each operation in terms of their working capital requirements and how efficient they are. Where we are in terms of debt management, we will continue to push for collections as efficiently as possible. We want to drive optimal level of inventory, which actually has also contributed to the move that we are seeing. We think it will hold, and we will continue for our post-paid book to do debt and factoring at some sustainable level that we've seen coming through.
There are still opportunities, but I think it's a significant turnaround in terms of working capital management if you compare it to the movement we saw two, three years ago in 2023 and so on.
I hope you covered this well.
Yes, thank you.
Thank you. Our next question comes from Nadim Mohamed of SPG Securities. Please go ahead.
Good afternoon. Thanks for the opportunity to ask questions. Any of my questions are already asked. I'll just ask two. Firstly, in the fixed data disclosure or fixed data revenue disclosure, you split it up into fiber-related and other. Now, if I look at the other, Q3 for the year-to-date first quarter, it was ZAR 881 million, and it was a full year ZAR 915 million. That would imply a very small number for Q4. I just want to check, while still in Q1, I just want to check if that's correct and if that's related to the decline in 88,000 subs that you've been reporting consistently over the year. Secondly, just on free cash flow, I was hoping Nonku could help you unpack the lease liability repayments.
If I recall, in the first half, there was an increase because of the Google fiber fair lease that was recognized in the fiber that you get through approving in the first half. There was about a ZAR 1.1 billion difference in the first half. For the full year, you've done an increase of ZAR 1.3 billion. I just would like to understand, I mean, is that mostly due to the external lease payments? What would the sort of normalized number look on a full-year basis for those external leases? Thank you.
Yes, Nadim, you're right. The other is the DSL decline. Maybe
if I touch on the lease liability, it's still the Google transaction, Nadim, because you'd recall in H1, what would have happened is that the Google transaction started in 2024. Net-net overall, we have now received all the payments we were expecting from the transaction in relation to the terrestrial and our part of what we should receive. We've paid what we needed to pay for the fiber pay. Net-net, we are back into an initial position, and the unwinding would continue over the period of the lease agreement. What you see in the 2025 year is a bit more payments because there were more receipts in the year before.
It really was just a timing difference, but the significant impact is in relation to the Google transaction that you see as a movement there.
Excellent. Particularly when looking at the external lease payments for Swiftnet, could you give us some guidance as to the quantum of that going forward? I think it's only for two months in FY 2025. For the full year, what's the quantum I'm looking at?
Yes. If you take the, and I mean, the IFRS 15 number in the financials will sit in different places. If you then take the two months that is now external, which is February and March, and brought it up to a full year, we would, in the future years, take into account the inflationary impact in line with the long-term agreement in relation to that. Yes, along the way, we may renew some leases, and some will come to an end. Overall, it is broadening up the two months you see and building the inflation levels that would come in the future years.
Thank you so much.
Our next question comes from Jervin Jackson of Siertree. Please go ahead.
Hi, Sipho. Thanks for allowing me to ask questions. Can you hear me?
We can hear you. Please go ahead.
Hello?
Jervin, your line is open. You can ask your question. I suspect Jervin might be having a technical problem. Our next question is a follow-up from Jono Bradley of Absa. Please go ahead.
Yeah, thanks very much. I just wanted to clarify on the lease cost impact. The ZAR 0.51 per share, can you just remind me what slide exactly should we be looking at to see that? Does this include the finance cost saving from the debt that you're paying now? Thanks.
All right. We have not explicitly put the 51 cents in a slide, and I was just indicating the impact of that. If you look in our financial statements, I think it is about note 13, where we have details of the Swiftnet. Let me just go to the financials. It is actually note 12.3, where you then see the details of the Swiftnet and basically the operating elements of it. If you just take off the ZAR 4,408,000,000, which is the profit on sale, you get to the operations for the 10 months in terms of the external element. For the lease-related impacts, we did not necessarily put it in the slide. It is information we have in the background. You will not see it in a slide explicitly.
Okay. Just to confirm then, for the $0.51 per share, does that include then taking into account the externalized lease cost? And then just to double-check, I think that does not include the interest cost savings.
It would be the externalized lease cost impact indeed, where we look at, as you would see it in the financial statements, we would take into account the depreciation related to the right of use and other elements. We do have finance charges impact. It is taking into account the full impact.
Okay. Thanks. Sorry. I just want to be completely clear. Is that then taking into account the interest cost savings on the debt that you would have paid down in May?
Correct. Correct. Because we have finance charges we're not paying any further because we've reduced the debt.
Okay. Thank you. That's very helpful.
Thank you. We have been joined by Jervin Jackson of Siertree. Please go ahead. If we could pause a moment. I do believe that his line is being checked first before he does join us. Thank you. We have been joined by Jervin Jackson of Siertree. Please go ahead.
Hi guys. Thanks for the opportunity to ask a question. Apologies for earlier. Just can I ask a very brief question? I guess everyone's asking the same question. We all want to know what you're paying per year for the lease. Can we work it a different way? Can you maybe just tell us the discount rate you got and how long is this lease? We can work out what a PMT should be per year.
What's the discount rate?
Can you repeat the question for us?
Can you give us the discount rate and the term of the lease? Then we can work out what the PMT is, the cash flow monthly, or the annual cash flow that you would be paying. I mean, also please, you can give us the annual lease cost. That would also work.
Can you come back to your lab one?
Sure. Maybe just coming back, apologies that I need to talk on silent. Just wanted to have your point of clarification. On your cash flow statement, on the cash flow slide that you pointed out to us, I must firstly take it as, okay, the working capital, is that just should be zeroed, and then the other should be zeroed as well, meaning that those do not repeat. That is kind of a good starting point. Is that what you are trying to say? Maybe I am just not understanding where all the various cycles are going.
On the working capital, the 300 cents, the ZAR 76 million we are showing as improvement is part of the work we have been doing to improve and optimize on the working capital. When we, I mean, we do not expect it to reverse if you zero it out, but we will continue to look for opportunities to continue optimizing on inventory. I think if we take a position that says from the debtor factoring, we are likely at the level of ZAR 800 million-ZAR 1 billion, you could take that as continuing as we continue with our post-paid. The inventory may come through as minimal as we continue to optimize. You could zero it out and say when we are at optimal level, we are not going to necessarily see significant working capital improvements necessarily unless there is a very different approach.
Yes, we've optimized working capital to a large extent.
Perfect. That makes sense. The other nine, is that just write-offs that will not repeat again? That is also a zero once off the number. Given that you are at least there now, you said your book is in a good position. The rest of it seems fine. We should not see more of these impairments going forward.
Yeah. If you look at the impairments, are you looking at impairments from the ECL perspective?
The 1,153 that says in other on your slide 37.
Oh, yeah. Those are non-cash items that would normally form part of our financial statement, which may recur to an extent depending on directionally what are some of the elements would be driving. If you look at it, we may have impairments indecisible, but we do not expect those to increase a lot. We have got other elements that may be non-cash coming through.
Okay. Perfect. Understood. Maybe just one more format that I think I lost you guys earlier with trying to take you to this question. He asked the EBITDA margin guidance, that does exclude property sales, right? Simple yes or no, I guess. You have to repeat what you said earlier.
The EBITDA margin in terms of the property sales we are saying, in this financial year, we had ZAR 654 million, which was once off. In the guidance, we have normalized that out. It is not expected to repeat.
When you say normalized, you do expect an average level of property sales every year, like a couple of hundred million?
Let me try and land you because I think you said you knew. What we're saying is, on an annual basis, we generally do about between ZAR 50 million-ZAR 100 million in property sales. That's been the kind of normalized trend. What we saw last year, which was in the EBITDA number for this year, was an exceptional amount of about ZAR 700 million, which was done in property sales. If you go to an EBITDA guidance, which gave us a year-end number for 2026, if you normalize to our normal trend, our year-end would be about ZAR 2500 million odd. That's when the guidance starts at ZAR 2500 million and goes to ZAR 2800 million. On a ZAR 2500 million-ZAR 2800 million, right? On a normalized level, because we still have some properties, smaller and smaller properties, ZAR 30 million odd, ZAR 30 million-ZAR 50 million odd of property that we dispose.
That should be your average rate of disposals, not.
At the 600 level.
At the 600 level. That is the normalization that Nonku is referring to.
Yeah.
Okay. That makes sense. Thank you very much for taking the time to explain that. I'll end it with a thumbs up.
Thank you. Ladies and gentlemen, just a final reminder, if you have asked a question, the important breaths are and then one. We have a follow-up question from Baron Roderick Ruthman of Lutfa. Please go ahead.
Thank you so much. Given it's very cold in Jervin today, I have one more question for my winter soldier there. Serame, can you please give us a sense of you're definitely winning market share in mobile, right? And how sustainable do you think that is? I mean, if the gap between you and the effective rate between you and the peers like MTN, Vodacom, as long as you maintain that gap, do you think this is sustainable, the fact that you keep winning market share and the fact that you have revised distribution or margin arrangement with the likes of Telkom and so on? Given that you expect to continue with that as well, I suppose what I'm trying to ask is, what can derail the winning market share? Thank you. Very cold.
Thanks, Baron. Baron, I think for the market share, you kind of hit the bullet of the Telkom proposition. It's not just about price. What we've been saying to the market is, if you look at where the growth is coming from, you must first understand the shape of all our customers. Telkom is sitting with about 70% data users. Our competitors, and where the growth is coming, are sitting, let me say, conservatively, 50% data users, which means that there is an opportunity of customers who are migrating from 2G into 4G, 5G propositions. Our price point is what is being attractive to those customers. That is where we've got the sweet point. If you do the math, it means that you've got about 20-30 million 2G subscribers who are moving.
Where they are moving to is a price proposition where Telkom has got an unbeatable data proposition. That is where the market is. For competition to come down to this price point means a significant margin drop for them. That is why we do not have to be dropping our prices any further, but have to then acquire these subscribers without eroding value. I think that is the key that Long Island's team have now hit to say, how do we acquire without destroying value, but ensuring that we acquire responsibly and maintain our margin growth? That sustainability, I think we can still hold for another 18-24 months.
If I can just follow up.
Of course.
I mean, sorry. Yes. I have a follow-up on that. I mean, if I look at the effective rate between you and, say, Vodacom, and especially at the headline rate, it looks like it's half the rate of Vodacom. From what you're saying, at the sweet spot, it might be even lower. The gap is massive. You should be able to, as long as you have that, the only way they can compete is to drop the prices and reprice the entire base. Is that the right way to look at this?
Pretty much so, Baron.
Okay. Thank you so much.
Thank you. Ladies and gentlemen, it appears we have reached the end of the question and answer session. I will now hand back to closing remarks.
Thank you all for taking the time to join us on this call. We always appreciate your time and your continued support for Telkom. If you have any further questions, please do reach out to our team. For those in Johannesburg and the rest of the country, please do stay warm, and we look forward to meeting you again. Have a good evening further. Thank you.
Thank you, sir. Ladies and gentlemen, Telkom closed today's event. Thank you for joining us, and we'll now disconnect your line.