Telkom has pushed back the listing of its masts and towers business because of uncertainty in global financial markets after Russia’s invasion of Ukraine shocked equity markets.
“Given the recent global events, current market conditions and the impact on the capital markets, the board has resolved to postpone the separate listing of Swiftnet on the JSE,” said Telkom in a note to shareholders.
Equity markets have been gyrating wildly over the past two weeks after Russia invaded neighbouring Ukraine. Investors are increasingly worried that the fallout from the conflict could choke global economic growth prospects.
After initial positivity at the start of the trading session, shares in Telkom erased those gains, falling 2.8% by the close and lagging behind gains of between 2.3% and 3% by rivals MTN Group and Vodacom.
The partially state-owned telecom 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.
Former CEO Sipho Maseko set the break-up in motion in 2020, saying the bulk of the group’s assets were not reflected in the market capitalisation of R22bn, reckoning that the sum of its parts could be worth as much as R53bn. He estimated then that Swiftnet was worth about R13bn.
In 2021, Telkom — now worth R20.63bn — indicated that it would “make a final determination on a separate listing before the end of the financial year” for the business. It is housed in its Gyro property and infrastructure unit, which has more than 1,300 properties.
Swiftnet has operated as a separate tower company for more than three years, running more than 6,000 masts and towers, which is the telecom infrastructure that beams wireless signals.
The group said it was “committed to its value unlock strategy ... premised on Telkom’s market capitalisation not representing its intrinsic value.
“Against this backdrop, the board continues to consider all strategic options that support its value unlock strategy, which include affirming the valuation of Swiftnet and its contribution to the valuation of Telkom.”
When Telkom announced the plan to float the business, it said it would keep 80% of Swiftnet at listing, with the free float set to rise over time as the group gradually sells down its stake.
If successful, the flotation would hand the company much-needed 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 telecom provider.
For investors, the listing would hand them a telecom infrastructure business that grinds out reliable, inflation-linked cash flows amid a surge in data consumption.
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