Johannesburg - The market last week cheered the growth in Telkom’s mobile business during the six months to September as the group said it was looking to unlock shareholder value through looking at third party investors at Gyro, its mast and towers business.
Telkom said it was clearly South Africa’s third largest mobile operator based on service revenue after mobile customers surged 19 percent to 13.7 million during the period helping to cushion the hefty decline in fixed voice revenue as more people worked from home.
Chief executive Sipho Maseko said Telkom Mobile had performed exceptionally well, despite the negative impact of the national lockdown on parts of the business.
“Telkom’s decision to invest in infrastructure ahead of demand enabled us to meet the surge in demand and weather the acceleration of the decline in fixed voice revenue during the national lockdown,” said Maseko, adding that the group was currently concluding a market sounding process at Gyro in a bid to unlock shareholder value.
“This entailed reaching out to a limited number of parties to determine the nature of a suitable transaction that can be achieved in the unlocking of value in this particular process.”
Maseko said the valuation included Gyro’s 3 650 commercially viable towers and excluded the 2 483 commercially not viable tower portfolio which did not have tenants and was located in low-demand areas with unfit characteristics. He said it was Telkom’s core belief that it remained undervalued as a company.
“Our market cap is not a true reflection of our intrinsic value,” Maseko said.
“Thus there is a massive valuation gap. Our enterprise value to earnings before interest, taxes, depreciation, and amortisation multiple (EV/ Ebitda) is currently two times to two and half times and we will explore ways to unlock this value in this conglomerate structure in a way that will ensure we will get the right valuation and unlock the value across the different businesses.
“Our Gyro business is at an advanced stage of this process and will be followed by Openserve thereafter.”
Telkom said it expected to conclude the phase 2 of its restructuring programme by the end of the financial year.
It said it was on track to realise our targeted cost savings of R1 billion to R2bn during the full year.
Phase 2 of the restructuring process involves 300 job cuts for information technology subsidiary BCX and will likely be concluded by the end of the financial year, while the head office and other support functions across other business units were also to be shaken up.
“With regards to the corporate centre as well as the support functions in the business units, we are still in the design phase and we expect to conclude that roughly sometime in the first half of the new financial year,” Maseko said. “The benefits of phase two of the restructuring will come through in the new financial year. “
BCX issued organised labour with a Section 189 notice last month after being severely impacted by the national lockdown, as customers were under severe financial pressure.