• Telkom has announced its decision to sell its mast and tower assets to a consortium for R6.75 billion.
• The consortium includes Actis and Royal Bafokeng Holdings which will own a respective 70 and 30 percent of the shares.
• The sale of its masts and towers will allow Telkom to service its debt and invest in the future of the telco.

While many in South Africa may be enjoying a long weekend, Telkom’s board of directors has been hard at work finalising a sale of its masts and towers.

The entity announced in February that it was in discussions with a preferred bidder that we now know is a consortium that includes Actis and Royal Bafokeng Holdings (RBH). Collectively this consortium is called Towerco Bidco Proprietary Limited where RBH holds 30 percent of shares and Actis holds the remaining 70 percent.

As per a SENS announcement, Towerco Bidco will purchase the masts and towers from Telkom subsidiary Swiftnet for R6.75 billion. For that money, the consortium will inherit as many as 4 000 sites currently used by Telkom and other major mobile network operators.

That is a nice chunk of change but it’s curious that Telkom, which operates a mobile network, is getting rid of its masts and towers. With that having been said, this infrastructure likely isn’t serving Telkom well and rather than hold onto this infrastructure, it makes sense to lease space on towers operated by Vodacom and MTN.

That R6.75 billion will be used to bring down Telkom’s debt, strengthening the network operator’s balance sheet. This in turn will allow Telkom to focus investments in its core business and deployment in pursuit of growth opportunities.

“This decision marks a pivotal moment in Telkom’s journey towards unlocking shareholder value and streamlining our focus on core business operations,” stated Serame Taukobong, Group chief executive officer at Telkom.

“This positions Telkom as a leading infrastructure company at the heart of South Africa’s digital future. This divestiture aligns perfectly with our strategy to concentrate on our infrastructure assets while realising the inherent value in non-core holdings.”

With the sale of its towers now underway, it appears that Telkom is turning hard into its fixed-line connectivity operations. This makes sense as Openserve was one of Telkom’s biggest winners in its most recent financial results.

The other big revenue driver was Telkom Mobile which might make the sale of infrastructure seem odd.

However, we know that loadshedding has increased the cost of running a mobile network as towers need backup power to ensure users can get online or even just make calls. This is likely a massive burden for Telkom and rather than maintain infrastructure, leasing it may save Telkom money at the end of the day.

Actis sees long-term value in the Swiftnet opportunity and welcomes the continued association with Telkom as it continues to provide access services to Telkom Consumer and Openserve and as Actis continues to grow its digital infrastructure portfolio, David Cooke, Managing Partner at Actis said in a statement.

The sale is contingent on shareholder and regulatory approvals. That means that these plans could be upended but Taukobong believes that the shareholders will recognise the value.

“We believe this strategic move will create long-term value for Telkom and its shareholders, cementing our position as a leader in South Africa’s evolving digital landscape,” the CEO said.