Telkom Earnings Jump Over 300% After Selling Swiftnet

South Africa’s leading telecommunications company, Telkom, has made a very important business decision that is changing its future. The company recently sold its towers and masts division called Swiftnet for R6.575 billion (about $350 million). This sale is causing Telkom’s profits to grow by more than 300%, which is one of the biggest improvements in the company’s history.

Why This Sale Matters So Much

The sale of Swiftnet is not just about getting money. It represents a major shift in how Telkom wants to do business. For many years, Telkom owned thousands of communication towers across South Africa that helped provide phone and internet services. These towers were important, but the company realized they could do better by focusing on newer technologies.

By selling these towers to a group of investors including Actis and Royal Bafokeng Holdings, Telkom has achieved three important things:

1. They received a huge amount of money that can be used to improve other services
2. They reduced their debt, which makes the company financially stronger
3. They can now concentrate on growing their most important services

The numbers from this deal are very impressive. Before the sale, Telkom’s basic earnings per share were R3.85. After the sale, this number jumped to R15.42 – that’s exactly four times higher! Another important financial measure called headline earnings per share grew by 10%.

To understand why this matters, think about it like this: If you had a small shop that made R100 profit each month, and then suddenly started making R400 profit every month, that would completely change what you could do with your business. That’s exactly what’s happening to Telkom but on a much larger scale.

Telkom’s New Strategy for Growth

Telkom’s CEO, Serame Taukobong, explained that this sale is part of their “OneTelkom” plan. This plan has several important goals:

• Focus on fiber internet expansion across South Africa
• Prepare for new mobile technologies like 5G
• Develop better digital services for customers
• Make the company more efficient and profitable

“We’re using this opportunity to build the Telkom of the future,” Taukobong said. “The money from this sale helps us focus on services that will matter most to our customers in the coming years.”

What This Means for Telkom Customers

For the millions of South Africans who use Telkom’s services, this change should lead to noticeable improvements:

1. Better Internet Services: More money will go into expanding fiber internet, which means faster and more reliable connections in more areas.
2. Improved Mobile Networks: Telkom can now invest more in upgrading its mobile network infrastructure, leading to better call quality and faster data speeds.
3. New Digital Offerings: Customers can expect innovative new services as Telkom develops more digital products.

These changes won’t happen overnight, but customers should start seeing improvements within the next year.

Why Selling Towers Was a Smart Move

Some people might wonder why Telkom would sell such important infrastructure. The answer lies in understanding how the telecommunications industry is changing:

• The tower business was stable but growing slowly
• Services like fiber internet and mobile data are growing very fast
• Maintaining towers requires a lot of money that can now be used elsewhere
• Other companies can operate the towers just as well

It’s similar to how a restaurant might decide to stop making its own bread and instead buy from a bakery. This allows the restaurant to focus on what it does best while still getting quality bread.

What Experts Are Saying About the Deal

Financial and telecommunications experts have been closely watching this deal, and most agree it was a good decision:

Andile Ndlovu, a telecom analyst at Investec, said: “Telkom has made a strategic move that positions them better for future growth. They’ve turned a slow-growing part of their business into cash that can fund faster-growing areas.”

Thandiwe Mokoena, a portfolio manager, added: “This is exactly the kind of decision we want to see from Telkom’s management. It shows they understand where the industry is going and are making tough choices to prepare for that future.”

How This Affects Telkom’s Employees

While the sale is good news for the company overall, it does mean some changes for workers:

• Employees working with the towers will now work for the new owners
• Telkom will likely create new jobs in growing areas like fiber and digital services
• There may be training opportunities for workers to learn new skills

The company has promised to help affected employees through this transition.

Telkom’s Plans for the Future

With the money from this sale, Telkom is planning several important initiatives:

1. Fiber Expansion: They want to bring high-speed fiber internet to more homes and businesses across South Africa. This is important because fiber is much faster and more reliable than older internet technologies.
2. 5G Preparation: While 5G mobile networks are still new in South Africa, Telkom wants to be ready when they become more common. This means upgrading equipment and testing new technologies.
3. Digital Services: The company plans to develop more online services that customers can use, possibly including things like cloud storage, online security, and smart home solutions.
4. Rural Connectivity: Telkom wants to improve phone and internet services in rural areas where coverage has traditionally been weak.

What Investors Should Know

For people who own Telkom shares or are thinking about investing, this sale has several important implications:

• The company’s financial health has improved significantly
• There’s potential for better dividends in the future
• Telkom is now more focused on high-growth areas
• The stock might become more attractive to investors

However, as with any investment, there are always risks involved, and past performance doesn’t guarantee future results.

Challenges Telkom Still Faces

While this sale solves many problems, Telkom still has challenges to address:

• Competition from other telecom companies remains strong
• The cost of rolling out new services is high
• They need to keep innovating to stay ahead
• Economic conditions in South Africa affect all businesses

The good news is that the money from this sale gives Telkom more resources to handle these challenges.

When We’ll See Results

Telkom will release its full financial results in June, which will give everyone a clearer picture of how the company is doing. In the meantime, here’s what to watch for:

• Announcements about new fiber areas
• Updates on network improvements
• Information about new digital services
• Any changes to customer plans or pricing

Roundup

The sale of Swiftnet marks the beginning of an important new phase for Telkom. By making this tough but necessary decision, the company has positioned itself to compete better in South Africa’s fast-changing telecommunications market.

While changes this big always come with some uncertainty, the early signs are positive. Customers can look forward to better services, employees have new opportunities, and investors have reasons to be optimistic.

As Telkom continues to implement its new strategy, all eyes will be on how quickly these changes lead to real improvements for everyone who depends on the company’s services. One thing is certain – the Telkom of tomorrow will be very different from the Telkom of yesterday, and that’s probably a good thing for everyone involved.