Telkom’s R6.75bn sale of Swiftnet strengthens mobile, fibre expansion

Telkom said that this marked a significant step in the implementation of it’s transformative strategic journey to focus on core operations while realising the value in non-core assets. Picture: Lalinka Mahote/Independent Newspapers

Telkom said that this marked a significant step in the implementation of it’s transformative strategic journey to focus on core operations while realising the value in non-core assets. Picture: Lalinka Mahote/Independent Newspapers

Published Dec 18, 2024

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Nicola Mawson

The sale of one of the largest owners, operators and developers of masts and towers infrastructure in the South African market to a consortium in which Royal Bafokeng Holdings (RBH) has a stake in a R6.75 billion deal gives Telkom even more room to expand its mobile and fibre business.

The State-owned telecoms company yesterday said it had received the go-ahead from the Independent Communications Authority of South Africa (Icsasa) to sell its masts and towers business, Swiftnet, to Actis and RBH.

Telkom’s shares were flat on the news, but closed 1.7% lower to R34.87 per share yesterday.

Actis is a global investor in sustainable infrastructure focused on the energy, infrastructure, and real estate sectors. RBH will have a minimum 30% stake. This was the last regulatory requirement after the Competition Tribunal gave the go ahead in September 2024.

In a statement, Telkom said that this marked a significant step in the implementation of it’s transformative strategic journey to focus on core operations while realising the value in non-core assets.

“The strong performance of our core business, coupled with strategic initiatives like the Swiftnet transaction, demonstrates that our strategy is delivering the promised results to the market,” said Serame Taukobong, the Telkom Group CEO.

Telkom’s most recent financial results surpassed market expectations as it reported adjusted headline earnings per share from continuing operations up 68% 146.9 cents per share.

Taukobong added that the “transaction is a pivotal moment in Telkom's implementation of our data-led strategy under OneTelkom”.

OneTelkom aims to sweat its assets by collaborating across the various business units to win more business, promote operational synergies and drive capital efficiency.

“We are creating a focused and agile Telkom that can invest in growth areas while maintaining our position as South Africa's leading telecommunications infrastructure provider,” said Taukobong.

“The sale will strengthen our balance sheet, reduce debt, and provide additional capital. This will enable us to focus our investment in next-generation technology infrastructure. We continue to make progress on the alignment of our asset portfolio and our disposal of non-core properties in support of our data-led growth.”

Peter Takaendesa, head of equities at Mergence Investment Managers, explained that selling Swiftnet will “materially reduce Telkom’s debt and also release more capital to invest in fibre and Telkom mobile growth”.

Telkom’s debt, as of the end of September, was at 1.3 times that of adjusted earnings before interest, tax, depreciation, and amortisation, down from 1.8 times at the end of March as it paid down debt by R885 million.

In its latest reporting period, Telkom stated mobile subscribers were at 22.7 million as of the end of September, the bulk of which were pre-paid.

Takaendesa has previously noted that Telkom’s mobile subscriber growth is ahead of that of its peers, MTN and Vodacom.

Its fibre business increased revenue 15.5% in the interim period to September, with 1.3 million homes now passed, an increase of 11.4%. About 640 730 homes are now connected to fibre, an 18.1% increase, with these households consuming 1 389 Petabytes of data each month – with a Petabyte equal to 1 024 Terabytes.

However, Telkom will have to pay monthly lease fees to Swiftnet’s new owners post the closing of the transaction, said Takaendesa.

“The net result over the long term will depend on Telkom's ability to generate higher returns on investment in fibre or mobile compared to simply remaining invested in Swiftnet,” he said.

Icasa’s approval results in a change of control of Swiftnet's licences. Swiftnet has some 4 000 masts and towers.

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