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Monday, 19 February 2024 12:20

Telkom provides an update on its potential sale of R8.7 billion Swiftnet.

By Lehlohonolo Lehana.

Telecommunications group Telkom has provided an update on its potential sale of Swiftnet today, saying it is currently in exclusive negotiations with a preferred bidder about the potential disposal of its masts and towers business housed in Swiftnet.

The group released a trading update for the quarter ended 31 December 2023, which revealed 2% revenue growth.

Group revenue increased to R11.30 billion and was driven by the company's data-connectivity propositions from its mobile and fixed networks. 

The group said that the preferred bidder is a consortium of equity investors led and managed by a reputable private equity firm.

In a cautionary announcement on SENS, Telkom said Shareholders are herewith further informed that substantial progress has been made on meeting the remaining agreed milestones under the exclusivity arrangement.

Nedbank previously said that the Swiftnet business is worth around R8.7 billion based on future expected cash flows.

The company expects to be able to make a more detailed announcement on or before it is required to update this cautionary announcement in accordance with the JSE Listings Requirements."

According to JSE Listings Requirements, after a company has issued a cautionary announcement, it must issue a progress report by way of a further cautionary announcement at least every 30 business days thereafter.

The company must do so until full details on the subject of the cautionary announcement have been announced.

Telkom CEO Serame Taukobong said, "Shareholders are advised that these exclusive negotiations may or may not lead to a transaction, and therefore, are advised to continue to exercise caution when dealing in the company's securities until a further announcement is made."

Part of the money from the Swiftnet sale will be used to strengthen Telkom's balance sheet. "It will be a big contributor to our negative free cash flow," he said.

"The cash income from the sale of the towers will help us to recalibrate our balance sheet and put more investment in capex for our fibre business."

"Post that, we will look at whether we will consider a special dividend. However, we are not thinking about that right now".

The deal is still subject to the necessary regulatory approvals and Telkom shareholder approval as it constitutes a Category 1 transaction in terms of the JSE Limited Listings Requirements.