JOHANNESBURG - South African telecommunications group Telkom raised its dividend payout ​ratio on Tuesday after strong cash flow and profit growth, helped by rising data demand and cost ​cuts.

The country's ​third-biggest mobile operator has been growing its mobile and fibre businesses while managing the decline of legacy services such as voice and copper-based broadband.

Migration to fibre and ⁠fixed-wireless products, as well as cheaper pricing has fuelled demand for data, with mobile data revenue rising 10.5% and fibre-related data revenue up 6.3% in the year to March 31.

Telkom, majority owned by the government, reported a 30.1% rise in headline earnings per share to 708.5 ​cents. Earnings before interest, ‌tax, depreciation and ⁠amortisation (EBITDA) increased 13.3% to ⁠12.5 billion rand ($772 million).

Free cash flow rose to 3 billion rand from 2.7 billion rand the previous ​year, driven by tighter cash management, cost reductions, lower lease payments ‌and reduced financing costs.

Reflecting the stronger performance, the ⁠board lifted its dividend payout ratio range to 40% to 60% of free cash flow, up from 30% to 40%.

Telkom declared a final dividend of 270 cents per share, up 65% having resumed payouts last year after a four-year suspension.

Shares in Telkom initially jumped 6.6% on the news before paring gains to trade 1.33% higher in the afternoon.

GROWTH FROM UNDER-SERVED REGIONS

Growth in the mobile unit continued to outpace larger rivals Vodacom and MTN, with service revenue rising 6.8%, supported by a 10.3% increase in prepaid revenue as customers responded to ‌low-cost data and voice bundles.

The group is also targeting under-served ⁠areas outside of the big cities to expand its subscriber ​base.

Chief Executive Serame Taukobong told Reuters that the strategy is driving results.

"As customers are now moving from 2G voice, they are looking for best value-fit data propositions and they're finding that sweet spot ​in Telkom," ‌Taukobong said.

Telkom reported double-digit revenue growth from non-metro regions during the year.

($1 = ⁠16.2551 rand)