INVESTMENT INSIGHTS - Telkom SA SOC (TKG)

START - R61 | FINISH - R75.70

1. HORIZON: 0 - 6 months (Medium -Term)

2. FROM: 30 April 2026 | UNTIL: 30 October 2026

3. MANAGEMENT ASSESSMENT: 24.1% growth

4. RECOMMENDATION: BUY

5. PROJECTION BASED ON: R30 000

TRADING PLAN

●     Potential Entry: Entry can be initiated once the share price closes above $27.50.

●     Risk Management: The stop-loss level is around R53.50, an area that represents a roughly 12.4% drop from the potential entry.

●     Profit Target: The next key resistance is near R75.50, which aligns with a 24.1% upward move from the potential entry level.

WHY THESE SHARES HAVE POTENTIAL FOR PROFIT

●     More South Africans Are Using Telkom for Data: Think about how much time people spend on their phones browsing the internet, streaming videos, and using apps. Telkom is benefiting directly from this trend. The company now has over 25 million mobile subscribers, and the number of people using Telkom for mobile data jumped by nearly 30% in the latest quarter. This growth is significant as data services now make up 60% of all the money Telkom earns.

●     Telkom is Laying Fibre Cables Across South Africa: Telkom's fibre division, called Openserve, is rolling out high-speed fibre internet to homes across the country. So far, it has passed over 1.5 million homes with fibre, and more than half of those homes have already connected to the service. This is an impressive take-up rate compared to competitors. What makes this even better for investors is that Openserve has now grown its revenue for three quarters in a row, while keeping its costs under control. A growing network with a high sign-up rate means more predictable, recurring monthly income for the company.

●     Telkom is Raising Prices and Investing in the Future: From 1 April 2026, Telkom increased its prices across mobile and fibre plans by between 4.5% and 10%. While nobody likes paying more, this is actually a positive sign for investors. It means the company has enough customer loyalty and market position to pass on higher costs without losing its customer base. On top of that, Telkom recently launched a fully funded programme to help small South African businesses adopt artificial intelligence. This positions Telkom not just as a network provider, but as a technology partner for businesses, opening up new revenue streams beyond traditional connectivity.

TECHNICAL INDICATORS

●     Trading Above the 200-Day SMA: The share price is currently trading above the 200-day simple moving average (SMA), a key long-term support level that separates a bullish trend from a bearish one. The fact that the price is holding above this level confirms the long-term momentum remains positive and buyers are in control.

●     Falling Wedge Pattern and 50-Day SMA, Breakout Pending: The share price has been forming a falling wedge pattern, a technical formation where the price makes lower highs and lower lows within two converging downward trend lines. This pattern is widely regarded as a bullish signal, as it typically indicates that selling pressure is exhausting itself and a reversal to the upside is building. Simultaneously, the price is testing the 50-day SMA, a key medium-term resistance level. A confirmed close above R61 would break out of the falling wedge and clear the 50-day SMA in one move, validating both signals at the same time and significantly strengthening the bullish case.

●     MACD Bullish Crossover: Adding further conviction to the setup, the moving average convergence divergence (MACD) indicator has produced a bullish crossover, with the MACD line crossing above the signal line. This momentum signal confirms that buying pressure is beginning to build and that the recent period of weakness may be coming to an end.

Taken together, the confluence of the price holding above the 200-day SMA, the falling wedge breakout pending confirmation above R61, and the MACD bullish crossover present a technically constructive setup for the share.

RISKS

●     BCX Division Remains a Drag on Group Performance: Telkom's enterprise IT division, BCX, reported a 9.3% revenue decline in the most recent quarter. This division is struggling with weak corporate spending, long sales cycles, and a difficult transition away from older technology services. Until BCX stabilises, it will continue to weigh on the group's overall results. Adding to the uncertainty, BCX recently lost its CEO and is currently being managed by an acting executive, which could slow down the recovery process.

●     Competition in the Mobile Market is Intensifying: Telkom competes against much larger and better-resourced rivals in MTN and Vodacom. Both competitors are aggressively expanding their own fibre and mobile data networks. There are also reports that MTN has held talks with advisors about a possible deal involving Telkom, which could create uncertainty around the company's strategic direction and weigh on the share price until clarity emerges.

●     Broader South African Economic Slowdown: Telkom's business is closely tied to the health of the South African economy. If consumer spending weakens further or businesses continue to cut their IT budgets, demand for Telkom's services could remain under pressure for longer than expected.

SOURCES

●     Telkom announces price hikes: What South Africans need to know for April 2026

●     Telkom launches first AI Catalyst Growth Programme to support SMME innovation and digital skills

●     Telkom Q3 FY2026 Trading Update -PDF

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** This article was prepared by BROKSTOCK analyst Maboko Seabi