Telkom seeks Swiftnet bidders

By Candice Jones for Telkom

Johannesburg, 14 Aug 2009

Almost a year after deciding to sell its wireless service provider, Telkom has issued a request for expressions of interest for Swiftnet.

Swiftnet has been a troubling business for Telkom, with the fixed-line giant battling to find an empowerment partner for it since 2001. Despite this, Swiftnet could prove to be a lucrative opportunity for incoming telcos, since it owns an ECNS licence.

The business operates independently of Telkom, meaning any assets can be transferred with the business. However, according to Swiftnet's licences, it is required to have a 30% empowerment ownership quota.

Telkom initially owned 60% of Swiftnet, with the remaining 40% in the hands of VHR Wireless, the then empowerment investor. However, VHR Wireless was unable to meet its shareholding obligations and, in 2001, Telkom bought the remaining 40% in Swiftnet, giving the operator full ownership.

Since then, Telkom has been on the hunt for an empowerment shareholder for the business. It had several offers which fell through, including one with a consortium led by DigitalIQ.

Telkom's last-ditch attempt to find a partner was last year, when the company tried to sell 30% of Swiftnet to Radio Surveillance Consortium (RSC). However, the Independent Communications Authority of SA rejected the offer, saying: “RSC did not meet the state's empowerment conditions.”

RSC offered R55 million for the minority stake. Since then, Telkom has been quiet about Swiftnet's future, besides mumblings of a possible sale.

Telkom has also since embarked on a cost-cutting exercise across its operations, which includes the culling of non-core operations.

BMI-TechKnowledge MD Denis Smit says Swiftnet is certainly a non-core activity for Telkom. “It makes sense that the company is selling. It has been in the pipeline for a year and Telkom has made no secret of wanting to divest in non-core activities.”

Meanwhile, he says any number of businesses could be interested in the company. Telkom's current request calls for a bidder to have at least 30% ownership, which does not leave many options, unless a new player enters the market.

Telkom did not include Swiftnet's results with its latest year-end financial results in June.