Telkom is funding the bulk of the capital cost of rolling out its mobile arm, 8ta, from money it gained selling its stake in Vodacom.
Telkom expects to spend a maximum of R6 billion on building a mobile network over the next five years. The company spent R614 million in the first six months of the year and is in the process of constructing 2 000 base stations.
Telkom unbundled its 50% stake in Vodacom in the middle of last year, selling 15% to Vodafone and listing 35% on the JSE. Acting CFO Deon Fredericks says capital expenditure for 8ta has been “pre-funded” as a result of the Vodacom sale.
Fredericks says the sale earned Telkom about R20 billion, of which about half went to government because of its Telkom stake. Of the R9 billion left, Telkom paid out a special dividend of almost R1 billion, tax on the payout, as well as paying down some debt.
As a result of the sale, says Fredericks, Telkom will be able to fund most of 8ta's roll-out without incurring much debt. He expects the mobile company to break even three years after launch and it will then fund its own expansion.
Fredericks says Telkom also has capacity to gear up and take on some debt should it need to do so in order to expand 8ta's coverage.
Acting CEO Jeffrey Hedberg explains the company's roaming agreement with MTN allows it to pinpoint where the most demand for its services are, and focus capital spend on those areas.
Telkom has a five-year national roaming agreement with MTN SA, which gives it access to MTN's 2G and 3G network throughout SA. Telkom will also look at infrastructure sharing to expand its coverage, says Hedberg.
8ta already has almost 200 000 subscribers, just one month after launch.
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