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Friday, 22 March 2024 13:36

Mobile operator Telkom sells towers business for nearly R7bn.

By Lehlohonolo Lehana.

Telkom has reached an agreement with a consortium made up of Actis and Royal Bafokeng Holdings to sell Swiftnet, and towers and masts business, in a debt and equity deal that gives Swiftnet an enterprise value of R6.75-billion.

If successfully concluded, Telkom will join rivals MTN South Africa and Cell C in selling tower infrastructure so as to focus on core business operations, leaving only Vodacom among the major mobile operators still owning its towers.

Telkom will sell Swiftnet to a newly created business called Towerco Bidco, which is 70% held by Actis, a global private equity firm, and 30% by Royal Bafokeng Holdings.

"This decision marks a pivotal moment in Telkom's journey towards unlocking shareholder value and streamlining our focus on core business operations," Telkom Group CEO Serame Taukobong said in a statement on Friday. Swiftnet owns about 4 000 high sites around South Africa.

"This divestiture aligns perfectly with our strategy to concentrate on our infrastructure assets while realising the inherent value in non-core holdings… This move underscores Telkom's commitment to fortifying its financial position, reducing debt and enhancing liquidity," he said.

As of Friday, 22 March, R360 million remains outstanding under a shareholder loan advanced by Telkom to Swiftnet.

"At the Closing Date, a portion of the Existing Shareholder Loan of up to R225 million may remain outstanding as payable by Swiftnet to Telkom together with applicable interest on the outstanding loan amount until fully settled (Continuing Telkom Loan)," the group said.

"To the extent that this occurs, the Continuing Telkom Loan will not be transferred to the Purchaser (and will be excluded from Sale Equity) and the Base Purchase Price will be adjusted accordingly."

Telkom's board previously said that Telkom's market capitalisation (roughly R13 billion) does not represent its intrinsic value.

The sale forms part of the company's value-unlock strategy as it is not a core asset. The disposal proceeds will allow the group to reduce its debt.

Telkom said it has ambitious growth plans across its business units, especially fibre-provider Openserve and broadband provider Telkom Consumer.

"The reduction of Telkom debt through application of the Disposal proceeds will strengthen Telkom's balance sheet and enable Telkom to release free-cash-flow for investment in Telkom’s core businesses and deployment in pursuit of growth opportunities, "it said.