Swiftnet sells, Telkom swells: one deal, big dividends — for now

Daily Maverick

6 days ago

Telkom dazzled investors with its financial results recently, but a deeper dive reveals that the sale of the Swiftnet tower infrastructure business – once considered central to Telkom's strategy – provided the windfall that lit up the numbers. But strip out Swiftnet, and the glow fades fast.
The Department of Communications and Digital Technologies (DCDT) congratulated Telkom on its 'phenomenal' results, with Minister Solly Malatsi hailing it as 'a key enabler of South Africa's digital future' in a statement on 10 June.
Unlike traditional SOEs like Eskom or Transnet, Telkom is listed on the JSE and not governed under Schedule 2 of the Public Finance Management Act – but with 54.5% of its shares held by state-linked entities, it behaves more like a public-interest asset than a private firm.
Despite these apparently strong financials, all of these indicators are positive as a result of the sale of a core business within Telkom's holding – Swiftnet, which owns all of the company's mast and tower business. The numbers vs the narrative
Telkom's FY2025 performance was strong across all headline metrics: group revenue rose 3.3% to R43.9-billion, adjusted EBITDA jumped 25.1% to R11.8-billion and free cash flow surged to R2.78-billion – a 555% increase on the prior year, almost unbelievable on paper. The company declared dividends for the first time in four years, totalling R1.3-billion.
Every number on the switchboard appears to be green, with the state emerging as a major beneficiary: a R540-million dividend windfall flowed into government coffers just in time to help buffer the fiscus.
Still, one question remains on the line: are these numbers the result of strategic depth, or a carefully choreographed series of asset disposals?
A towering turnaround
At first glance, the turnaround reads like a textbook recovery play: streamlining, divestiture, energy efficiency, capital discipline. However, a detailed analysis of the financials shows that nearly all the key indicators of Telkom's turnaround hinge on a single major action: the sale of Swiftnet, Telkom's mast and tower business.Swiftnet managed more than 4,000 high sites – many in remote areas – serving as the physical spine of Telkom's mobile and fixed wireless networks. Its sale means Telkom will now pay to access the infrastructure it once owned, with long-term lease costs baked into future operations.
Swiftnet's disposal generated R6.6-billion in proceeds, cut net debt to almost half of what it was, bringing it to R7.48-billion, and unlocked the funds for dividend reinstatement. The buyer was a consortium led by Actis, alongside Royal Bafokeng Holdings and the Mineworkers Investment Company. Not insignificantly, the R4.4-billion net gain on Swiftnet's sale also inflated reported profit, pushing EBITDA margins higher.
Free cash flow surged by 555% – impressive, yes, but primarily due to this windfall, a reduction in capex and tightened cost controls. That eye-watering number highlights the real concern: Telkom's FY2025 turnaround looks like a one-trick pony, unless the company intends to keep selling off core infrastructure.
Telkom brought back dividends this year, promising to pay out between 30% and 40% of its free cash flow to shareholders. But in 2025 it went even higher, paying out 48%. That extra payout was made possible by the cash it earned from selling Swiftnet, which gave the company a big financial boost.
Notably, Telkom hadn't paid dividends since 2021, citing pandemic pressures, margin decline and capital requirements. The 2025 payout signals a strategic shift, though not necessarily a structural one.
'Without Swiftnet's R4.4-billion disposal gain, Telkom's core profit story looks significantly more modest – and its future operating costs are now structurally higher,' the company noted in its investor release.
Divestment-driven growth
The Swiftnet deal transferred control of income-generating infrastructure to an external operator. Telkom now leases back some of these same towers at a cost. While the short-term capital unlocked helped reduce debt and deliver dividends, it baked in long-term lease liabilities.
Selling vs leasing towers – a case study in strategic trade-offs
MTN's 2021 sale of more than 5,700 towers to IHS Towers unlocked immediate capital and was initially hailed as a strategic move to streamline its balance sheet. However, the deal later attracted criticism as leaseback costs began to rise, eroding the expected financial benefit.
More significantly, MTN ceded control over key passive infrastructure, which reportedly led to delays in site upgrades, reduced agility in rural network expansion and strained relationships with the tower operator over access and maintenance. The long-term implications of relinquishing infrastructure ownership became a cautionary tale in the telecoms industry – one that Telkom may now be echoing with the Swiftnet sale.
What this means for you
Telkom's big numbers might look great for now, but they came from selling key parts of the business, like its cellphone towers. That helped pay shareholders, but it also means Telkom now has to rent back the infrastructure it once owned.
If this cuts into future network investment, you could see slower upgrades, patchy coverage in rural areas, or even higher prices.
If you're a Telkom customer, it's fair to ask: will I get less for more? Will my signal suffer? Or should I start looking at other networks? Whether this will, in fact, be the case will likely only be seen by Telkom's performance and service over the current financial year.
On the spectrum – litigation and market dominance
In 2021-22, Telkom challenged Icasa's high-demand spectrum auction, claiming the process favoured comparative incumbents such as Vodacom and MTN. It cited ignored roaming agreements (such as Vodacom-Rain) and obsolete competition models.
'Icasa failed to conduct a new competition assessment and relied on outdated frameworks,' Telkom argued in its court application filed with the North Gauteng High Court at the time.
While the litigation was eventually withdrawn, the company's underlying point may now work against it. With debt slashed and cash freed up, Telkom is better placed than ever to bid aggressively, potentially replicating the very dominance it previously challenged.
Paper tiger or infrastructure backbone?
Telkom's 2025 performance is no doubt impressive, but many of its gains are the result of concretely one-off, non-repeatable actions.
The 2025 financial year gave Telkom a fiscal breather. The current financial year will determine whether that space becomes structural headroom, or whether the company suffers in delivery of key services due to the sales it has made. DM