Telkom SA SOC Ltd Disposal of swiftnet Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jonathan Bradley - Absa Bank Limited - Analyst : Just 3 from me, please. Firstly, on the transitional service agreements. Does this imply that there are no longer -- or no longer lease contracts -- or sorry, longer-term lease contracts at this stage? Are these transitional service agreements over and above the existing lease contracts? Secondly, can you give us a sense of what the lease liability will be for Telkom after the sale, as well as the net EBITDA impact? And finally, are you able to disclose what the escalation are likely to be in the lease agreements?

Question: Madhvendra Singh - HSBC - Analyst : Can you hear me?

Question: Madhvendra Singh - HSBC - Analyst : Yes. Okay. Sorry. So my first question is your expectation in terms of how much cash you are expecting to come into the company post transaction. Because you mentioned about the debt at Swiftnet and so on. So just it will be easier for us to understand if you give a number if all the conditions are met, what will be the cash into the company. And then second question is, how -- would there be a capital gains tax applicable on discussion? And is there other tax which we need to be aware of, which has to be paid for? And finally, does it change your CapEx plan in any way post transaction, especially given that towers will no longer be with you, does it also mean any negative impact on earnings? So if you could talk about that.

Question: Nadim Mohamed - SBG - Analyst : And well done on achieving what looks like an attractive price for the towers. Just a few questions on my side. Firstly, could you confirm that there is no high currency or dollar component to the lease rates post conclusion of the deal? Secondly, my understanding is that the acquirer will take REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 22, 2024 / 9:00AM, TKGJ.J - Telkom SA SOC Ltd Disposal of swiftnet over Swiftnet as it stands right now and Telkom will then be the anchor tenant for most of these sites. Are there any new services that you are subscribing to post the transaction, like power-as-a-service transactions or any other revenue streams that are part of this particular contract? And that you think that we are probably quite close to you moving into a close period, I was wondering if you could give us an update on how Mobile, Openserve and BCX are trading relative to the trends we saw in the last set of results?

Question: Jonathan Kennedy-Good - Prescient Securities - Analyst : I just wanted to check whether you've put any restraints on the buyers in terms of how much they can gear up these assets? Because I think in the past, what we've seen with asset sales is that they've been welcomed initially, and then these private equity companies, they gear up these businesses very heavily and then can't assist you with the -- with your CapEx rollouts, with our network rollouts, and ultimately can become problematic if they take on too much gearing. So just trying to understand how much gearing they're taking on -- in this process.

Question: Preshendran Odayar - Nedbank Corporate and Investment Bank - Analyst : Congratulations on it. I've got a few questions, I'm going run on them quite quick. Just wanted to clarify, first, you're selling the business of Swiftnet. Now, can you sell the electronic communications network licenses that come with the business as part of it? Or is it something that the new acquirer has to apply for new, i.e., CNS and ECNS licenses to carry the traffic? And then just a clarification on that lease liability question. I think the question might have been phrased -- I'll try and rephrase it, but I think before you consolidated the results of Swiftnet, so we couldn't really see a lease liability number in Openserve and Telkom Mobile. Now that is we'll be sitting outside of the entity, you won't consolidate it. So I think the question is what will a lease liability number look like on the balance sheet of Telkom? And you can give it to us on a pro forma basis as of the interim balance sheet that you provided as at end of -- in November last year. Third question is, is there any restrictions on retrenchments as part of the sale agreement, thinking about when Telkom bought BCX and the restrictions that were imposed then. Is there similar restrictions being imposed on the sale? And then just 2 more. With the -- would the lease agreements that you've said that you've signed with Telkom and NGN and Vodacom and the like, will the sale of the business, being a change in owner effecting your these lease agreements and what I am alluding to here is similar to what happened with Vodacom win, the Cell C transaction happened and that affected the distribution of Vodacom from a Blue Label perspective, just want to see if that anything happening there. And then the last question is, as part of the sale, are you also selling the rights to build more towers. And if you can share how many (indiscernible) rights do you have that can form part of the sale? So I know it's quite a bit. So hopefully, you can answer some of it.

Question: Godwill Chahwahwa - Coronation Fund Managers Ltd - Analyst : And congratulations on the deal breakthrough. Just a quick question on the details underlying the leases that your Mobile business has with Swiftnet. You might have talked about this. I might have missed it because my line did go off on it. But what are the broad terms between what's the escalation? I know a question was asked about dollar leases, whether there is any dollar component to that, I suspect that, that your answer there was that there is isn't. But what is the duration of the leases that your Mobile business has on these towers with business and what kind of escalations were embedded in those leases?

Question: Myuran Rajaratnam - MIBFA - Analyst : Firstly, congratulations on getting the deal across the line. Secondly, just following up from Godwill and Nadim's question. Can you just -- sorry, I'm just trying to get this in my head, is absolutely no dollar lease part to it? And your payments, there's no dollar component to it, right? Because Actis is a dollar company, and we have this problem in Nigeria, there's a dollar component that -- when the land goes, it's going to hit. So I just sort of double checked, there is nothing of that sort. And then secondly, thank you for the update on how the trading has been in the business. But can you give some more color on the operational side? You're doing well on the prepaid side in the Mobile business. Is that continuing at a similar sort of run rate? And also on Openserve, homes passed, homes connected, are they all sort of flipping along at a similar sort of run rates square?

Question: Nadim Mohamed - SBG - Analyst : Just a few follow-ups from me. Just in terms of your lease rates with the new entity, are there any other changes? I'm just thinking, if I look at other tower companies on the continent, they typically pass through CPI inflation, power escalators as well. Are there any new components like that in terms of the new agreement that you signed with the entity itself? I would really appreciate if you could explain that. And if you just give us, let's say, some comfort that based on the latest terms and conditions, are you confident that there will be accretion in terms of the lease costs being lower than what you said in terms of interest expenses and in terms

Question: Nomandla Duma - PSG Asset Management - Analyst : Can you hear me?

Question: Nomandla Duma - PSG Asset Management - Analyst : Just want to give congratulations on this concluding the transaction. Quicks one for myself, just wanted to understand because you're saying that the proceeds for the transactions will basically be going to be applied to debt. Just your indications, Serame, in local level on just your comfortable level of net debt-to-EBITDA that you'd like to kind of get to, given the fact that you are within your target as it stands today. So just wanting some color on that and I guess the proceeds left post that, what is your plan on that and just in order of priority as per your capital allocation plan will be quite useful for us.

Question: Madhvendra Singh - HSBC - Analyst : Yes. Just a couple of follow-ups. On this shareholder loan, if you could clarify, what -- I mean what is the reason why the loan still is on the books there? Why was it not settled earlier? And the second question is just following up on the earnings accretion part. Are you comfortable in saying that the deal is accretive on earnings level as well? Or your comment earlier was purely on a value perspective, not on earnings perspective. So if you could give some indication on the earnings accretion part will also be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 22, 2024 / 9:00AM, TKGJ.J - Telkom SA SOC Ltd Disposal of swiftnet And then a very quick one on your strategic towers comment you made. Just wondering how many such towers are there? And when I connect that question with the question you answered about licenses which you are transferring to the new. I'm just wondering how -- under which license then you are owning these strategic towers still? Wouldn't you need a license to own and run those strategic towers as well separately? So -- and if you have the license, then why can't you roll out new towers under that license?

Question: Myuran Rajaratnam - MIBFA - Analyst : Serame, you mentioned that this value unlock strategy from the executive team and the Board is a multistep process, and this is the first step, Swiftnet. Every time I look at the valuation for Openserve versus some of your peers like CIVH, it's sitting at ZAR 50 billion EV at the moment and I will do a little tap dance. So I just wanted to confirm that, that is still ongoing value unlock, it's just the first step in it, right? And the rest will come when they come, yes?

Question: Nomandla Duma - PSG Asset Management - Analyst : Just a quick one from me, just a follow-up. The 1x to 1.5x, is that ex IFRS 16 or including IFRS 16? As a case, I guess just kind of getting a sense of where we should sit. And then I guess the next question from me from just -- for Serame would be, okay, then what's next step? Can you just give us time lines on at least the next follow-up on the anticipation of the transaction to fully close, the process that follows from now the announcement and the legalities of, this [Com Com] and all of that. I guess what we're trying to kind of understand is if you foresee a risk where the deal basically goes sideways and it gets delayed because of any, I guess, regulatory hurdles that you guys are not able to meet.