Telkom to sell towers business

Telkom announced today that it will sell its masts and towers business, housed in Swiftnet, for a base purchase price of R6.75 billion.

Swiftnet’s core business involves generating revenue from leasing space on its owned mast and tower-related infrastructure to customers, mainly mobile network operators.

This enables customers to deliver connectivity to their respective subscribers or customers and operate wireless networks.

Swiftnet is one of the largest owners, operators and developers of masts and towers infrastructure in the South African market. It owns approximately 3,900 commercially viable masts and towers in South Africa

In a SENS announcement released today, Telkom confirmed that it has entered into a sale agreement with a consortium of investors consisting of two parties.

These parties are –

  • An infrastructure fund managed by a subsidiary of Actis LLP
  • A vehicle owned by Royal Bafokeng Holdings as its BEE partner

Telkom said the disposal constitutes a Category 1 transaction in terms of the JSE’s listing requirements, as it exceeds 30% of the company’s market cap.

The telecoms giant said the disposal is in line with its stated value-unlock strategy, which includes considering non-core assets for disposal.

The purchase consideration for this disposal represents an enterprise value of R6.75 billion

The aggregate cash consideration payable for the sale equity by the purchaser in cash to Telkom will be calculated with reference to an enterprise value of R6.75 billion.

This number is the base value of Swiftnet on a debt-free, cash-free basis before considering the following adjustments –

  • Positive adjustment for any cash
  • Negative adjustment for the continuing Telkom loan
  • Negative adjustment for any debt
  • Negative adjustment for capital expenditure
  • Positive or negative adjustment for working capital

Each of these adjustments will be calculated at the effective date of the sale. In addition, interest (at a rate of prime minus 5%) will accrue for the benefit of Telkom on the total purchase price from the effective date up to the closing date.

Telkom said the proceeds from this sale will be used to primarily pay down its debt, thereby strengthening Telkom’s balance sheet and enabling it to release free cash flow for investment into its core businesses.