Swiftnet negotiations reach advanced stage

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 19 Feb 2024
The proposed Swiftnet transaction is subject to shareholder and regulatory approvals.
The proposed Swiftnet transaction is subject to shareholder and regulatory approvals.

Negotiations with the potential buyer of Telkom’s Swiftnet masts and towers business have reached an advanced stage, says the telco.

In its cautionary announcement released this morning, the telephony group says substantial progress has been made with the preferred bidder − a consortium of equity investors (including a black economic empowerment partner), led and managed by a reputable private equity firm.

The telephony group says it expects to make a more detailed announcement in due course.

The unit owns a portfolio of 6 200 communication towers in SA.

In August, Telkom kicked off negotiations with the two bidders selected to progress with engagements. The disposal process further advanced in late 2023 and Telkom entered an exclusivity period with the one preferred bidder, as announced last month.

Interest in the telco’s assets gathered momentum over the last few years, as it looked to sell off part of its assets amid a difficult operating environment, evolving technological advancements and accelerated power outages.

Telkom is increasingly becoming attractive to suitors because of its extensive infrastructure, which is considered key in the ongoing fibre market battle.

In its trading update for the quarter ended 31 December 2023, released today, the telco says Swiftnet achieved solid earnings growth as the unit continued to commercialise and expand.

The tower build programme remained steadily on track, with nine towers and four in-building solutions sites being constructed during the quarter, it says.

“Total revenue increased by 4.7% to R333 million, with revenue from the growing customers increasing by 16.3% to R257 million, underpinned by escalations, new tenancies, 5G expansion and antennae upgrades, reflecting our customers' focus on network improvement and modernisation,” according to the results statement.

The first phase rollout of power-as-a-service was initiated, with sites expected to be completed and operational before the end of the current financial year. The programme supports its customers’ plans of ensuring power security and resilience, and in turn, will be a new revenue stream for Swiftnet, it says.

“The board of directors of Telkom remains committed to the value unlock strategy premised on Telkom's market capitalisation not representing the intrinsic value of its underlying assets.

“As previously communicated, a multi-party disposal process commenced in late-2022 following the board's approval to affirm and realise the value of Swiftnet through an outright disposal of the masts and towers business, to enhance shareholder value and focus on core business competencies,” continues the statement.

The proposed transaction is classified as a category one transaction, and is subject to shareholder and regulatory approvals, cautions the company.

Shareholders have been 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.