Greetings and welcome to Telkom's annual results presentation for the year that ended 31 March 2022. My name is Serame Taukobong, and with me is Dirk Reyneke, our Group CFO. I will go through the trading environment, and Dirk will come in and cover the details and financials. The results were delivered in a very tough trading environment. The year was characterized by prolonged effects of COVID on certain sectors of the economy: an intensely competitive landscape, volatile capital markets, and social instability. The economy remains constrained, and consumers are under pressure from rising interest rates, rising energy and fuel costs, and ongoing legislation, which is also adding to the constrained economy. We did see increased competitive activities in the market, especially in the mobile space, and consolidation in the market. The regulatory environment is stabilizing. The spectrum auction took place in March 2022.
Telkom obtained 20 MHz of 800 and 22 MHz of 3500 for ZAR 2.1 billion. Telkom's total spectrum portfolio now stands at 170 MHz across all bands. This newly acquired spectrum will enable us to offer credible 5G propositions. The sub-1 GHz enables us to deploy network more efficiently and increase coverage. Although we had a good outcome in the auction, the results confirmed that we had consistently argued about market dynamics. We think that the forward-looking settlement we've agreed with ICASA is an opportunity to resolve current market changes. ICASA has agreed to license the spectrum and remain assigned interim to the auction no later than 30 June 2022 and finish the licensing period within this calendar year. I will now go through the high-level performance of our business units before I hand over to Dirk to unpack the Group financial performance.
Starting with Openserve, Openserve business stabilized as the business evolves to next-generation networks. The stabilization path continues, reporting flat revenue of ZAR 13.4 billion after several years of decline due to the legacy business. Significant progress has been made to transform the business. The business mix has also evolved at the end of the year, with more than half of the revenue being generated from next-generation business. Overall, Openserve's stable performance lays a good foundation for growth as Openserve returns to growth in the next financial year. Openserve's performance is underpinned by an increased fiber demand for fiber services across the carrier and consumer segments. We have seen a significant improvement in the number of homes passed and also the connectivity rate of above 46%. EBITDA remains stable, flat at a level of 31%. Moving on to Swiftnet. Swiftnet continues to commercialize its portfolio, with revenue up 4.4%.
Swiftnet continues to commercialize its portfolio in line with its growth strategy, which entails increasing tenancy in the existing portfolio, acquiring sites and building new towers, as well as expanding the range of products and preparing for the implementation of 5G by our clients. In the current year, Swiftnet grew its new towers by 31% to 152, while it doubled the number of in-building solutions, albeit from a lower base. Overall, the productive portfolio size has increased by 5.9% to more than 3,900. The revenue increased by 4.4% to ZAR 1.3 billion. This performance includes the impact of terminations and continued focus in modernizing of our mobile network operator customers. From a profitability perspective, Swiftnet EBITDA was decreased by 8.6% due to a new process of allocation costs. It still remains at a high EBITDA of over 70%. Now moving to our mobile business.
The mobile revenue grew in line with the industry. Mobile revenue grew by 6.3% year-on-year. Despite the tough competitive landscape, our subscribers grew by 10.5% to 16.9 million subscribers, with a blended ARPU of ZAR 90 rand. The significant contributor emanated from prepaid base, which grew by 12% to 14.3 million, driven by LTE. Despite the challenging environment, our postpaid grew by 3.4% to 2.7 million subscribers, with ARPU holding steady at ZAR 212 rand. The mobile broadband subscribers grew to 10.7 million subscribers, supporting a 2.9% growth in mobile data revenue. Overall, mobile traffic grew by 3.3% to 973 PB. We invested ZAR 2.8 billion in CAPEX, which shows a slight decline from last year, bearing in mind that we did preload a lot of our CAPEX last year ahead of the temporary mobile spectrum.
In essence, over the past two-year period, we've maintained a run rate of between ZAR 3 billion-ZAR 3.5 billion on mobile CAPEX. Coming on to BCX. BCX remains under pressure, although we saw some throwbacks in revenue in H2. Due to the sluggish economy and the impact of global supply challenges, that hit BCX. As a result, revenue declined by 2.6% to ZAR 15.3 billion, with an EBITDA margin of 15.4%. The revenue performance fares well compared to the first half of the year, where it recorded a 6% decline in revenue. We saw an improved performance with some throwback in revenue in the second half of the year, though revenue remains negative at 2.6% decline. This is because of the stabilized converged communication business, with its revenue fairly flat. We saw exceptional growth in cybersecurity, IoT solutions, innovation, and technology, albeit from a smaller base.
I will now hand over to Dirk to unpack the Group financial performance. Thanks.
Thank you, Serame, and good morning, everybody. The Group financial performance I'll do in two parts. Firstly, I'll take you through the financial performance for the full year 2022, and secondly, the revised guidance. So the Group performance remained under pressure due to sluggish economy, global supply chain challenges, and chip shortages. That resulted in flat Group revenues with a slight decline of 1.1%, flat EBITDA with a decline of 0.5%, while the margin improved by 2 percentage points. 2.5% headline earnings per share growth underpinned by broadly flat EBITDA, but the reduction in finance charges, forex losses, and fair value movements. If we look at the net debt to EBITDA ratio at 1.2 times, this is after allowing for the spectrum payment.
Excluding spectrum funding, the net debt to EBITDA was 1.1 times, and all of this resulted in a negative free cash flow of ZAR 2.1 billion, excluding spectrum ZAR 938 million, which I'll cover in more detail later. The Group revenue at 42.8% decreased slightly, impacted by competition intensity in the mobile sector. Mobile service revenue grew 3.3% to ZAR 17.5 billion on the back of a 10.5% year-on-year growth in active customers to just under 17 million customers, and stable postpaid ARPU, holding firmly at 212,000. The slowdown in economic recovery and global supply chain constraints, which has resulted in computer chip shortages, has resulted in a further 6% decline in IT revenues. It's however pleasing to note that the rate of decline has slowed down in our fixed business.
Fixed voice decline in the prior year period was 25%, and fixed data was 8.6% compared to 17.9% and 3.5% respectively in the current financial period. And then we continue to commercialize the masts and towers. I think Serame has already referred to that. The underlying Group EBITDA is stable at just under ZAR 12 billion, and the EBITDA margin expanded by 2 percentage points to 27.9%. This was basically underpinned by our sustainable cost management program in prior years, which aims to contain OPEX growth below inflation and optimize cost to serve. And as a result of that, our OPEX declined by 4% year-on-year, despite an average group-wide salary increase of 6% effective from 1 April 2021. The reduction in OPEX cost and the optimization of our cost to serve supported the improvement in our total cost to revenue ratio.
Underpinned by our sustainable cost management program, we continue to focus on optimizing the mobile direct expenses. We've seen a 23.8% increase in mobile handset revenues, resulting in a 4.3% increase in direct costs, which was partially offset by the lower mobile roaming traffic. Our mobile cost efficiency ratio on the graph to the right-hand side, cost to serve, has continued to improve down to just over 27% now, demonstrating efficient growth of the mobile stream. And then the cost to serve improvement was enabled by optimizing the roaming cost as we maintain stringent roaming traffic thresholds on our roaming partners' networks and migrate traffic to our own network, supported by the ongoing network investment.
If we look at earnings, we've seen slight growth in basic earnings per share, increasing by 1.4% to ZAR 5.366, while headline earnings per share increased by 2.5% to ZAR 5.75 compared to the prior years. This was largely driven by lower finance charges. Lower finance charges, as a result of the lower and stable interest rates and the settlement of the SARS liability in the comparative year, our funding strategy allowed us to balance our cost to debt ratio at 53%-47%, floating to fix, which also ensured that the risk of changes in interest rate remains balanced. Furthermore, we had fair value adjustment improvements year on year. We continue to invest in our key growth areas, fiber, mobile, and masts and towers.
Although the capital investment decreased by 11% to ZAR 7.4 billion, it still represents a CAPEX to revenue ratio of 17.5% within the band that we set for ourselves. This was a result of a decline in CAPEX invested in the mobile business, in line with our disciplined capital allocation. Simultaneously, we continue to accelerate our fiber rollout and monetization. Fiber services now make up 42% of the total CAPEX executed compared to 29% in 2021. Homes passed increased by 52.7%, while homes connected increased by 38.4%, while we're still maintaining a connectivity ratio of more than 46%. The free cash flow decline year on year was largely driven by four areas. First of all, a revenue decline in the current financial year. Secondly, the increase in handset purchase and sales following reopening of the economy as a result of the COVID-19 lockdown.
As I said, the postpaid revenue grew, but that has got a cost impact and a significant investment in devices. The CAPEX overhang from the acceleration of the last quarter of the prior year, that the cash was paid out in the Q1 of the current year, and then the spectrum payment. Despite executing approximately ZAR 1 billion handset financing in the current year compared to roughly ZAR 400 million in the prior year, our handset debtors increased significantly as a result of the handset sales increase. Excluding the spectrum investment, free cash flow is negative ZAR 938 million. We still have an adequate balance sheet capacity to fund our strategy despite the acquisition of the spectrum, which resulted in our net debt to EBITDA increasing to 1.2 times. In the current year, we settled ZAR 193 million debt in line with our debt maturity profile.
It's over and above the ZAR 1.1 billion net debt repayment in the prior year. Excluding spectrum, our net debt to EBITDA is 1.1 times, and we target to maintain annual debt redemptions at or below ZAR 2 billion per annum to manage refinancing risks. We'll continue to maintain a disciplined capital allocation framework that's growing shareholder value over the long term. We will first prioritize growth to ensure sustainability of the business. In funding for future growth, we will continue to invest in assets that give us a reasonable return, i.e., a weighted average cost of capital plus 2%-3% on a forward-looking basis. Returning cash to shareholders remains a key element of our capital allocation framework, and we are in year two of the three-year dividend suspension period, but the board remains to commit the reinstatement of the dividend policy at the end of the third year.
In closing, full year 2022 has been a reset year following changes in the global market, regulatory environment, intense competitive landscape, and weak macroeconomic environment. A solid financial framework to support the Group strategy and deliver sustainable returns for shareholders is key as we go forward. We will therefore focus on enhancing our financial framework, where the Group returns to growth, top-line profitability, and free cash flow from the next financial year. Going forward, we expect Telkom Mobile to grow in line with its industry peers, while we expect overall fixed data revenues to start growing from the next financial year. Group revenue will grow at mid-single digits over the medium term, and so will EBITDA. We'll continue to invest between 16%-18% on CAPEX ratios, and we'll keep the net debt to EBITDA ratio to less than 1.2 times. I will now hand back to Serame to conclude.
Thank you, Serame.
Thank you, Dirk. I will now go through the strategic review. Before I start, it's been six months since I took over from Sipho. From my personal perspective, and on behalf of the Telkom Group, I'd like to wish Sipho all the best in his new ventures. He's certainly set the company on a firm foundation. The key challenge for us is we believe that the strategy is sound. Might need a tweak here and there, but the big focus for us is really on saying, how do we execute, execute, execute on a strategic imperative and making sure that our CU ratio improves quite significantly. Let me just recap our strategic pillars. We have maintained our pivot strategy, remained victorious in broadband, having more than 11 million broadband subscribers. Our operational efficiency continues to deliver sustainable EBITDA despite economic challenges.
From a technical perspective, we've invested and modernized our network. Our big focus is going to be on portfolio diversification, how we identify the key partnerships that are required for us to execute and make sure that we deliver on the value unlock journey. We are ready. It's time for us to execute. Strategic imperatives to enhance our value. We've talked about growth, scale, and capability, how we identify the key partnerships that are required for us to execute and make sure that we deliver on the value unlock journey. We are ready. It's time for us to execute. Strategic imperatives to enhance our value. We've talked about growth, scale, and capability. In order to deliver sustainable growth, we'll address scale and capabilities in some of our businesses. Scale enables market relevance in our core business, and capabilities allow us to access adjacencies to opportunities and new sources of growth.
These strategic imperatives are also strategic rationale for our partnership model. We strongly believe that partnerships are going to be critical to accelerate the Telkom Group strategy. These partnerships will take different forms, such as commercial, strategic, and equity. We will assess on a case-by-case basis. We believe that the role of partnerships in driving strategic themes is expanding and strengthening our value proposition, driving digitization, enabling advanced capabilities, improving. We strongly believe that partnerships are going to be critical to accelerate the Telkom Group strategy. These partnerships will take different forms, such as commercial, strategic, and equity. We will assess on a case-by-case basis. We believe that the role of partnerships in driving strategic themes is expanding and strengthening our value proposition, driving digitization, enabling advanced capabilities, improving our efficiencies, and increasing our market expansion. I'm also pleased to announce that our ESG strategy has been formalized.
We'll take different forms, such as commercial, strategic, and equity. We will assess on a case-by-case basis. We believe that the role of partnerships in driving strategic themes is expanding and strengthening our value proposition, driving digitization, enabling advanced capabilities, improving our efficiencies, and increasing our market expansion. I'm also pleased to announce that our ESG strategy has been formalized. During this financial year, we embarked on a process of formalizing our ESG, which has since been approved by Group Exco and the board. The ESG strategy is aligned to the sustainable development goals we can impact and influence.
Our initial perspective is that there are six focus areas, which are highlighted on the screen and more detailed in the booklets. The focus areas will be on operational efficiencies, digital planet, investing with purpose, digital. During this financial year, we embarked on a process of formalizing our ESG, which has since been approved by Group Exco and the board. The ESG strategy is aligned to the sustainable development goals we can impact and influence. Our initial perspective is that there are six focus areas, which are highlighted on the screen and more detailed in the booklets. The focus areas will be on operational efficiencies, digital planet, investing with purpose, digital services, and empowered communities. We have safe science-based targets and a pathway to net zero. In addition, we have focused on a number of initiatives in environment, social, and governance.
From the next financial year, ESG will be linked to management incentives such as STI and LTI to ensure solid execution. The impact of all these initiatives will be reported on an ongoing basis in various platforms. I have covered the Group strategy. I will now touch on a strategic focus area for each business unit. To recreate the strategy. In addition, we have focused on a number of initiatives in environment, social, and governance. From the next financial year, ESG will be linked to management incentives such as STI and LTI to ensure solid execution. The impact of all these initiatives will be reported on an ongoing basis in various platforms. I have covered the Group strategy. I will now touch on a strategic focus area for each business unit.
The strategy is sound, but there's a need to strengthen execution and strategic imperatives such as scale and capabilities in some of our core business. In consumer, it's really about expanding the network and accelerating mobile growth. BCX, cloud platform services, and digital platform services. For Openserve, it's to continue to modernize the network and drive growth. For Swiftnet, it's about increasing tenancy on our existing portfolio and expanding the range of products and services. For Gyro, it's about optimizing the existing data centers and also ensuring that our real estate portfolio segmentation is ready for viable projects with prospective investment perspective. Value unlock. Value unlock remains key to us. If we look at what sits under the Telkom umbrella, we have InfraCo structures that sit in a different asset class. Our infrastructure businesses present significant value unlock opportunities.
InfraCo assets trade higher multiples, such as tower, data centers, and fiber core. Telkom is currently valued at a Telkom multiple, which is much lower than these different assets. We will be embarking on executing this value unlock with speed. The board is considering various higher multiples, such as tower, data centers, and fiber core. Telkom is currently valued at a Telkom multiple, which is much lower than these different assets. We will be embarking on executing this value unlock with speed. The board is considering various options that talk to the value unlock strategy. The board is focused on driving maximum shareholder value and believes the strategic route will, one, unlock value for shareholders by affirming the valuation of Swiftnet and its contribution to the overall Telkom. Opportunity to scale Swiftnet being part of a bigger M&T portfolio and/or acquire more advanced expertise capabilities.
We are not limiting ourselves only to listing, but looking at all these. Value for customers, for shareholders by affirming the valuation of Swiftnet and its contribution to the overall Telkom. Opportunity to scale Swiftnet being part of a bigger M&T portfolio and/or acquire more advanced expertise capabilities. We are not limiting ourselves only to listing, but looking at all these options to make sure that we get the best value unlock for Swiftnet and for our shareholders. From BCX, it's really. Value for customers, for shareholders by affirming the valuation of Swiftnet and its contribution to the overall Telkom. Opportunity to scale Swiftnet being part of a bigger M&T portfolio and/or acquire more advanced expertise capabilities. We are not limiting ourselves only to listing, but looking at all these options to make sure that we get the best value unlock for Swiftnet and for our shareholders.
From BCX, it's really about getting a strategic equity partner. We have started this journey, and we hope very shortly we'll be able to announce an opportunity with one such deal. In addition, cloud consulting, cloud services, hyperscaler partnerships, BCX OneCloud are some of the things we're looking at. Key thing for us is how do we drive the high growth area of cybersecurity and also prime BCX to find the right partner to expand beyond the borders of South Africa. In concluding, we believe our strategy is solid. We need to strengthen our execution arm. Going to.
So is how do we drive the high growth area of cybersecurity and also prime BCX to find the right partner to expand beyond the borders of South Africa. In concluding, we believe our strategy is solid. We need to strengthen our execution arm. Going forward, we'll focus on our core businesses and capitalize our strengths. We are building a robust partnership model to address scale and capabilities to drive value in the businesses and deliver growth. Telkom Group is not excused. We had challenges in the current year and made significant inroads into evolving our business from legacy to next-generation business, which lays the foundation for future growth. We will continue to invest, strengthen our broadband leadership, which is our strength, and drive conversions while migrating legacy to next-generation businesses. Thank you. We will now take Q&As. Thank you, Sir.
We have a question from Wessel Joubert from Westbrooke Alternative Asset Management. Wessel is asking, please can you break down why there was such a big swing in working capital? Do you expect this to reverse or is? Thank you, sir. We have a question from Wessel Joubert from Westbrooke Alternative Asset Management. Wessel is asking, please can you break down why there was such a big swing in working capital?
Do you expect this to reverse or is the current level of working capital a new normalized level?
I'll take that. I'll start off, and I suppose that the question is on the back of free cash flow. So if I take free cash flow excluding spectrum, we refer to the CapEx overhang from the last quarter acceleration in the prior year that was in excess of ZAR 1 billion rand, slight decline in revenue, close to ZAR 500 million.
And then if you look at the impact of the increase in handset purchases and the increase in handset sales, this probably got close to a ZAR 2 billion rand impact on a gross basis. And that is one of the biggest contributors to the working capital move because all that sits in debtors. You sell it on day one, and you only recognize the revenue over the period of the contract. We have managed to offset that slightly by selling some of the devices off balance sheet, some of the device debtors' books we factored off balance sheet. You'll recall ZAR 400 million of that in the prior year, just over ZAR 1 billion in the current year. So an improvement of off-balance sheet financing of around ZAR 600 million. So those are the major reasons. It's really cash flow and accounts receivable. Hope that helps.
By selling some of the devices off-balance-sheet, some of the debtors' books we factored off-balance-sheet. You'll recall ZAR 400 million of that in the prior year, just over ZAR 1 billion in the current year. So an improvement of off-balance-sheet financing of around ZAR 600 million. So those are the major reasons. It's really cash flow and accounts receivable. Hope that helps.
Thanks, Dirk. Another question from Wessel. Will there ever be a scenario that Telkom can operate closer to the global industry standard of CAPEX relative to revenue?
Yeah, I think it depends what you see as the global standard. And I think the difficulty is in comparing Telkom with a mobile company or an infrastructure company.
Thanks, Dirk. Another question from Wessel. Will there ever be a scenario that Telkom can operate closer to the global industry standard of CAPEX relative to revenue?
Yeah, I think it depends what you see as the global standard. And I think the difficulty is in comparing Telkom with a mobile company or an infrastructure company. It includes an IT business, and it includes a significant real estate business. So that benchmark is the challenge. I think we've always said that we will continue to invest where we see strategic opportunities for growth on the long term, and that's what we will continue to do.
Another question from Wessel again. Please explain what the long-term margins for Openserve can be. Can this reach peer levels of closer to 60%? Also, please discuss where we are in the process of having Openserve as a standalone entity and if there has been any interest from external parties.
Said that we will continue to invest where we see strategic opportunities for growth on the long term, and that's what we will continue to do.
Another question from Wessel again. Please explain what the long-term margins for Openserve can be. Can this reach peer levels of closer to 60%? Also, please discuss where we are in the process of having Openserve as a standalone entity and if there has been any interest from external parties.
I think the journey for Openserve has started. We are well underway in the balance sheet separation. The final decision has to be taken to the board. We will hope to announce that in a month or two. That will obviously open up the opportunity then for external investors because once it's a standalone entity, it certainly can attract then the markets that we require.
In terms of the long-term EBITDA aspirations, I think that will be a function of when the Openserve entity is unleashed, can it then command the same levels of EBITDA margins that its peers command? Don't want to add any further. Taken to the board. We will hope to announce that in a month or two. That will obviously open up the opportunity then for external investors because once it's a standalone entity, it certainly can attract then the markets that we require. In terms of the long-term EBITDA aspirations, I think that will be a function of when the Openserve entity is unleashed, can it then command the same levels of EBITDA margins that its peers command? Don't want to add any further. I think you've covered it. Thanks. If I can just check if there are questions on the Chorus Call teleconference.
We do have a question from the conference call. Our first question is from Cesar Tiron of Bank of America. Please go ahead.
Yes, hi, everyone. Good morning. And thanks for the call and the opportunity to ask questions. I have two questions, actually. The first one is really on the strategic options as related to some of the assets which you contemplate to potentially monetize. The strategic, I would say, thinking has been going on for a couple of years, and yet we haven't seen any actions in the field. Can you please tell us if you have any?
The strategic, I would say, thinking has been going on for a couple of years, and yet we haven't seen any actions in the field. Can you please tell us if you have any? As related to some of the assets which you contemplate to potentially monetize. The strategic, I would say, thinking has been going on for a couple of years, and yet we haven't seen any actions in the field. Can you please tell us if you have any timeframe under which you'd like to complete any assets else? That's the first question. And the second one, do you think your free cash flow will be positive in 2023, excluding any spectrum payments? Thank you so much. I'll take the first one. I think in terms of strategic options, you're absolutely right. We have been gearing ourselves and ready for it.
We do intend, by the end of this financial year, to at least make one or two significant announcements in this regard.
Yeah, I think in terms of free cash flow, we're certainly targeting for it to be positive in this current financial year. It is dependent on revenue targets being met as well as further cash release initiatives which we are working on, some of them very close to finalization. So we're confident that we should get to positive free cash flow in the current year before spectrum payments.
Great. Thank you so much.
Say that again, please.
Thank you so much.
It's dependent on revenue targets being met as well as further cash release initiatives which we are working on, some of them very close to finalization. So we're confident that we should get to positive free cash flow in the current year before spectrum payments. Great.
Thank you so much.
Say that again, please.
Thank you so much.
Thank you so much. Okay, sorry. Do we have further questions on the QRS call teleconference?
Yes, we do. We have a question from Jonathan Kennedy-Good of JPMorgan. Please go ahead.
Good morning, and thank you for the opportunity to ask questions. Just a quick question on the mobile business. If I look at service revenue, it looks like second-half service revenue actually declined slightly given very strong equipment sales in the half.
I'm just wondering where you've seen the competitive pressure, how you're responding to it, and how you think.
Please go ahead.
Good morning, and thank you for the opportunity to ask questions. Just a quick question on the mobile business. If I look at service revenue, it looks like second-half service revenue actually declined slightly given very strong equipment sales in the half. I'm just wondering where you've seen the competitive pressure, how you're responding to it, and how you think you can recover growth into this new year. And then secondly, you mentioned a BCX equity partner. Would you be looking to sell a significant equity stake in the business, or are we talking about maintaining control or 25% stake? Just trying to understand how we should think about that.
On the mobile business, I think the attack is twofold.
We did see initially quite aggressive activity in the postpaid market. The team responded well, and we saw postpaid grow by 3.7% and, more importantly, maintain output at levels of ZAR 213. We are also responding with. Understand how we should think about that. On the mobile business, I think the attack is twofold. We did see initially quite aggressive activity in the postpaid market. The team responded well, and we saw postpaid grow by 3.7% and, more importantly, maintain output at levels of ZAR 213. We are also responding with quite aggressive prepaid offerings in the market which have gone out shortly. Equally that, we are also utilizing the strength of fiber in the market, as Dirk has highlighted, the high growth in fiber, also ensuring that we ring-fence and protect the LTE business and grow further new LTE growth.
So that's where we see the market pressures coming from, and we feel that the team is really impressed to respond to those markets, not just limited to pricing, but also making sure that our trade presence is improved significantly. For BCX, right now, the focus is more on a strategic partner. We've not decided on what level of investment we're looking there. The key thing is we're looking at scale, especially on capabilities that such a partner will bring on board.
Thank you.
Thank you, Jonathan.
Thanks, Rame.
We have a question from the webcast from PHF from ION Group. What are Telkom's plans for the maturing debt of ZAR 2 billion in FY2023? What are Telkom's plans for the maturing debt of ZAR 2 billion in FY2023?
Yeah, I think that's within, again, we look at that within the financing and capital framework, and some of that will probably be refinanced where we got funded from other alternative sources. If you look at all the sources of cash flow in, we are busy selling off non-core assets in terms of unused properties. We also saw the consolidation on the property market. We will refinance some of it. As Rami has referred, there could be value unlock revenue in, and then we're also busy with cash flow initiatives that should improve the cash flow. So I think it will be a mix, but yeah, refinancing will probably be the bulk of it.
Thanks, Dirk. Another question from Wessel. Please explain why when you expected to externally finance the handsets, was there such an impact on cash flow?
Yeah, as I. Then we're also busy with cash flow initiatives that should improve the cash flow. So I think it will be a mix, but yeah, refinancing will probably be the bulk of it.
Thanks, Dirk. Another question from Wessel. Please explain why when you expected to externally finance the handsets, was there such an impact on cash flow?
Yeah, as I said, the handset impact on cash flow in round numbers, almost ZAR 2 billion, and that's a combination of inventory levels that we had to pick up to come back into the post-COVID levels of postpaid sales. And secondly, an increase in sales where we all know that that handset sale is made on day one, and the revenue and the cash flow is spread over a 24-month period. So I think that's the single biggest reason.
Thanks, Dirk. If I can, please check if we have questions on the QRS call teleconference. Thank you.
We have no further questions on the conference call.
Okay, just the last question from the webcast. Telkom spent ZAR 2.1 billion on fiber. What EBITDA will this CAPEX generate?
Yeah, I think let's look at the Openserve margin. The Openserve margin currently around 30%. We had the question earlier on, will that pick up? Openserve margin still is.
Thank you. We have no further questions on the conference call.
Okay, just the last question from the webcast. Telkom spent ZAR 2.1 billion on fiber. What EBITDA will this CAPEX generate?
Yeah, I think let's look at the Openserve margin. The Openserve margin currently around 30%. We had the question earlier on, will that pick up?
Openserve margin still is at a blended margin on legacy and next-generation revenue, where for the first time now, the next-generation revenue is over source margin. The Openserve margin currently around 30%. We had the question earlier on, will that pick up? Openserve margin still is at a blended margin on legacy and next-generation revenue, where for the first time now, the next-generation revenue has overtaken the legacy. So if any, that margin could go up slightly. But currently, on a gross revenue basis, it's probably around 45%-55% legacy next-generation. To split out the OPEX is a bigger challenge with many assumptions. So we don't currently report the EBITDA line on separate levels. We report the gross margin levels, and then you can apply the 30% margin. Taken the legacy. So if any, that margin could go up slightly.
Currently, on a gross revenue basis, it's probably around 45%-55% legacy next-generation. To split out the OPEX is a bigger challenge with many assumptions. So we don't currently report the EBITDA line on separate levels. We report the gross margin levels, and then you can apply the 30% margin. Thanks, Dirk. No further questions. I'm handing over back to Serame Taukobong. Thank you. It has been a tough, challenging market for us. As we said, I think we're proud. The work has been done on value unlock. It's time for us to go and execute. We remain. Assumptions.
As we said, I think we're prized. The work has been done on value unlock. It's time for us to go and execute. We remain committed to ensuring that we deliver the best value for our shareholders. Thank you very much. It has been a tough, challenging market for us. As we said, I think we're prized. The work has been done on value unlock. It's time for us to go and execute. We remain committed to ensuring that we deliver the best value for our shareholders. Thank you very much.