Telkom soars on plan to list tower business

• Investors add R3bn to market value in a day • Decision on Swiftnet expected by March

Shares in Telkom surged on Tuesday, adding more than R3bn to its market value, after the group announced a multibillionrand plan to list part of its property business in a move meant to unlock value from a portfolio of assets it says is not fully reflected in its share price.

The partially state-owned telecoms operator has been working on a plan to release billions of rand trapped in its sprawling structure, which includes properties, masts and towers, IT company Business Connexion and internet fibre operator Openserve.

On Tuesday, the group said it was pursuing a listing of its Gyro masts and towers business, which beam wireless signals and are sometimes considered a neighbourhood eyesore.

Telkom expects “to make a final determination regarding a separate listing before the end of the financial year” for the business, called Swiftnet. It is housed in its Gyro property and infrastructure unit, which has more than 1,300 properties.

Swiftnet runs 6,225 masts and towers, and has operated as a separate tower company for more than three years.

Investors cheered the news, sending shares in Telkom soaring almost 15% to R43.20, its highest close since late July and bringing gains in the year to date to about 40%.

“The telco towers listing, if realised, could provide a significant value unlock for the business. The current view is that within the Telkom makeup Swiftnet could be grossly undervalued by about R6bn,” said Shaun Murison, senior analyst at IG Markets.

Outgoing CEO Sipho Maseko set the break-up in motion in 2020, saying the bulk of the company’s assets were not reflected in the market capitalisation of R22bn.

The group estimates that the sum of its parts could be worth as much as R53bn.

In an interview with Business Day, Maseko said they had valued Swiftnet at about R13bn, in line with Telkom’s previous estimates.

“We still say it’s a fair value,” Maseko explained.

Telkom would hold on to 80% of Swiftnet at listing, with the free float set to increase over time as the group gradually sells down its stake.

“The intention is to list by the

end of the financial year,” Maseko said, which would indicate before the end of March 2022.

If successful, the move would also hand the company muchneeded cash to continue funding its heavy capital expenditure on its mobile phone network, which has shot past Cell C as the country’s third-largest player and drives Telkom’s transformation from a fixed-line operator to a modern telecoms provider.

Maseko said the approach to separate Telkom’s businesses had enabled “clear visibility of the growth potential of each business. Under the management of Gyro, Swiftnet has diversified its tenancy with 56% of its tenants coming from the industry.

“A separate listing of Swiftnet will affirm the valuation of the masts and towers business and its contribution to the overall valuation of the Telkom business, thereby unlocking further value for Telkom.”

OFFLOADING

Mobile phone companies have been offloading towers and masts to dedicated infrastructure companies and renting back the space, allowing them to raise money to expand their networks and wipe out maintenance costs.

Telkom’s news comes just as Nigeria’s IHS Towers, of which MTN holds about a third, gets ready for its own flotation on the New York Stock Exchange.