South Africa’s government-owned telco is in exclusive negotiations with a preferred bidder for its towerco business Swiftnet
Telkom SA said it was in exclusive negotiations with a preferred bidder on the possible sale of its masts and towers business, Swiftnet. According to Reuters, the preferred bidder is a consortium of equity investors, including a Black Economic Empowerment partner, led and managed by a “reputable private equity firm”.
South Africa’s third largest telco said it also plans to accelerate the process of selling minority stakes in its subsidiaries Openserve and BCX, respectively specialising in fibre optics and IT systems integration.
The telco began negotiations earlier this year for the sale of its Swiftnet telecoms towers unit which it considers undervalued because it is hampered by the group’s structure current structure. It had planned to separately list Swiftnet on the Johannesburg Stock Exchange in 2021 but this was suspended in March 2022 due to the impact of the Russia-Ukraine war on financial markets.
“Our strategy and performance continue to deliver industry-leading connectivity rates, enabling more South Africans access to affordable, high-speed internet,” said Telkom Group CEO Serame Taukobong at the telco’s interim financial results for the six months ending 30 September. “We are encouraged by the progress made in the Swiftnet transaction which, when concluded, will enable us to strengthen our balance sheet and continue to execute our strategic goals.”
Telkom wants to shift to digital infrastructure as part of its “value unlocking program” which aims to: “promote strategic growth by consolidating core assets to improve capital efficiency and drive operational synergies to offset the impact of migrations to next-generation technologies. The transition is expected to be completed by December 2025.”
Steady results
The telco reported a 46.7% jump in half-year profit, boosted by lower depreciation charges and growth in core profit. Group revenue grew 2.5% to 21.8bn rand ($1.19 billion), driven by mobile growth, monetising fibre rollouts, and growth of the IT business, it said.
Mobile service revenue rose 4.1% to 11bn rand. The telco’s mobile broadband subscriber base increased by 10.5% to 12.2m, driven by the expansion of its LTE – increasingly preferred offerings of affordable entry-level LTE pre-paid bundles and unlimited LTE postpaid offerings. Wireless broadband users now make up 66.7% of its total mobile base.
It’s Openserve fibre business saw 6.9% revenue growth as customers migrated away from copper. It the reporting period, it saw a 22.4% increase of homes connected to 542,598, while homes passed grew by 20.6% to 1,158,761.
Telkom said its cost-reduction initiatives partially offset inflationary pressures and resulted in operating expenses increasing 2.4%, adding its profit was also boosted by lower depreciation charges, according to Reuters. Despite the higher operating expenses, however, group EBITDA grew by 1.7% to 5bn rand.
“These results show we are making steady progress executing our infrastructure-focused strategy under OneTelkom,” said Taukobong. “The growth in our mobile and fixed data services demonstrates our investments in next generation technologies have also put us on the right path as data consumption continues to surge across our networks.”
The telco maintained its full year guidance, while noting the challenging economic climate.
Spectrum update
Telkom suggested the interference issues in the analogue TV spectrum released by the Government – which was auctioned off in the previous year – seemed to have been resolved and should now be available nationally. With the clearing of the sub 1 GHz (as confirmed by regulator ICASA), the outstanding auction fees are payable before 31 December 2023.
“ICASA has also begun the process of licensing additional high demand spectrum and has stated that it aims to conclude this process by 31 March 2024,” said the telco in a statement. “Telkom has requested that ICASA postpone the second auction to the next financial year (i.e. 2025), on the basis that studies still need to be completed by ICASA in preparation for the next auction, and that the current challenging economic environment, including the impact of loadshedding, will make it particularly difficult for Telkom and other market participants to partake in the auction.”
“ICASA has, to date, not responded to Telkom’s request,” it added.
According to local media reports, competitors MTN and Vodacom strongly oppose any such delay.