Telkom CEO Serame Taukobong — Telkom Group CEO Serame Taukobong

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.

“Beyond the financial implications, this transaction ensures seamless continuity for our related businesses, particularly Telkom Consumer and Openserve, by guaranteeing continued access to Swiftnet’s infrastructure under mutually beneficial terms,” Taukobong added.

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Although an enterprise value of R6.75-billion has been attached to Swiftnet (defined by the parties as the “base purchase price”), this will not be the amount paid by the Actis/Royal Bafokeng consortium.

The base purchase price will be subject to the following adjustments:

Positive adjustment for any cash;
If applicable, a negative adjustment for a Telkom loan to Swiftnet (currently R360-million). (At the closing date, the quantum of Telkom’s loan to Swiftnet is likely to have reduced to R225-million. This loan will not be transferred to the consortium and will be excluded from sale equity.);
A negative adjustment for any debt;
If applicable, a negative adjustment for capital expenditure; and
A positive or negative adjustment for working capital, with each of these adjustments to be calculated as at the effective date of the transaction.

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 and including the closing date.