Latest news with #Swiftnet
Daily Maverick
23-06-2025
- Business
- Daily Maverick
Swiftnet sells, Telkom swells: one deal, big dividends — for now
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 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
IOL News
10-06-2025
- Business
- IOL News
Market cheers as Telkom rings in robust results
Telkom store at N1 City in Goodwood, Cape Town. Image: Ian Landsberg/Independent Newspapers The market on Tuesday cheered as Telkom rang in robust results for the year ended 31 March and resumed its dividend, which saw its share surge 7%. In morning trade the share was up 7.35% at R42.95 on the JSE. Telkom said mobile subscribers were up 13.4% to 23.2 million. Serame Taukobong, Telkom Group CEO said, 'The company has largely modernised its technology infrastructure and executed on a robust, detailed strategy across its operations. The financial results for FY2025 confirm that the business has not only stabilised but has built a platform for accelerated growth." In key financial metrics, adjusted headline earnings per share rose 102.4% to 583.2 cents; while adjusted basic earnings per share were up 128.9% to 681.7 cents. Ebitda was up 25.1% to R11.8 billion; while revenue rose 3.3% to R43.9bn; with free cash flow up 555.2% to R2.8bn. Taukobong said Telkom's differentiated strategy over the past year centred on three key pillars: The first pillar was sales engine optimisation. "We engineered our sales engine to prioritise efficiency, streamlining regional teams into agile, data-driven units and investing in digital tools to empower frontline teams." The second pillar was network excellence. "We prioritised strategic investments in our infrastructure, expanding fibre and 4G/5G coverage to underserved areas while enhancing urban network performance." The final pillar was customer-centric value. "We continued disrupting the market by expanding our flexible, affordable plans tailored to diverse segments, from data-centric bundles for cost-conscious users to seamless connectivity solutions for small, medium and large enterprises. We supported these with transparent pricing and proactive service," he said. Taukobong said in a significant milestone, Telkom had successfully concluded the disposal of Swiftnet, the masts and towers business to the consortium led by Actis and Royal Bafokeng Holdings with a total cash consideration of R6. 618bn received on March 27. "We are strategically dedicating R4 750 million of the proceeds post year end to strengthen our balance sheet. This deliberate move is aimed at fortifying the balance sheet for future growth, fuelling innovation, and ensuring we maintain a competitive edge in a dynamic market. The remaining proceeds are earmarked for profit-enhancing capital investments as well as a special distribution to shareholders," he said. Serame Taukobong, Telkom Group CEO. Image: Supplied The group reinstated its dividend, saying it will return a total dividend of R1.3bn, which includes an ordinary cash dividend of R833 million (163 cents per share) and a special dividend of R500 million (98 cents per share) from the completed disposal of the Swiftnet masts and towers business, resulting in 261 cents per share being returned to Telkom shareholders. Across its various segments, Telkom reported notable growth. Telkom Consumer saw a 10.2% increase in mobile service revenue, supported by a 19.5% rise in its mobile data subscriber base, which reached 15.2 million. Openserve recorded a 5.9% increase in fibre-related data revenue and achieved a market-leading fibre-to-the-home connectivity rate of 50.4%. BCX posted a 12.7% increase in fibre-related data revenue, along with a 5.8% growth in cloud services revenue. Gyro, Telkom's standalone infrastructure subsidiary, contributed to improved liquidity by realising total cash proceeds of R730 million from the transfer of 57 properties. Looking ahead, Telkom said its medium-term roadmap leverages its current momentum as it sets "ambitious yet achievable objectives for the next three years". Maintaining a strong balance sheet remains a top priority; a focus on efficiency as well as monetising infrastructure assets and improving medium- to long-term returns. "Essential to achieving these financial targets is continued stability in South Africa, a growing economy supported by a macro-economic environment that does not deteriorate from current levels, and a stabilised energy supply. While their impact is not yet visible, recently escalated global tensions and emerging trade wars could limit South Africa's economic growth, " Telkom said. BUSINESS REPORT Visit:
