RMB pushes telecom infrastructure investment

Rand Merchant Bank (RMB) continues to push its funding and investment in telecom infrastructure, now helping to fund the recent sale of Telkom’s SwitftNet for almost R7bn. 

Last week, Telkom announced it had sold Swiftnet its masts and towers business to a consortium of equity investors led and managed by Actis, which has 70% of the purchaser’s shares. The balance is held by Royal Bafokeng Holdings (RBH) for R6.75bn, with RMB acting as financial adviser to RBH on the transaction.

“The transaction marks a major milestone for RBH, as our first investment in towers. Digital connectivity plays an important role in driving growth for SA and has a strong, positive impact on society. The investment by RBH will help drive mobile connectivity across SA,” RBH CEO Albertinah Kekana said.

The Bafokeng say the transaction represents “a mutually beneficial arrangement” that enables Telkom to de-gear its balance sheet and help unlock value for shareholders, while supporting the Royal Bafokeng nation through RBH, “in its strategic focus on investing in infrastructure development that will create sustainable growth and prosperity”.

Swiftnet owns and operates about 3,900 commercially viable masts and towers in SA. It generated a profit of R188m in the six months to September 2023.

When Telkom tried to list Swiftnet in early 2022, the business was valued at about R13bn, based on a sum of the parts calculation by former CEO Sipho Maseko. Business Day understands that initial listing plans were abandoned because market conditions allowed for a return of less than R10bn.

However, the market has turned since the initial valuation. Telkom boss Serame told Business Day that he was confident the price is fair.

For RMB, this deal underscores the investment bank's appetite for telecom infrastructure. 

“We are pleased to have been able to advise RBH with a maiden transaction in the towers space. RMB has deep sector expertise both within the TMT [technology, media and telecom] and African towers space, so we were able to bring that to bear in our advisory approach,” said Arun Varughese, co-head of TMT at RMB.

“This transaction will help RBH further its goals of investing in attractive digital infrastructure in Africa and expanding its infrastructure portfolio on the continent.” 

In 2022, fibre network operator Octotel secured R2bn in financing from RMB to push its network rollout, particularly in outlying parts of SA. At the time, it planned to use the funds to reach 500,000 homes. 

Rival lender Standard Bank is also bullish on this segment. 

Vumatel and Dark Fibre Africa’s parent company, Maziv, secured a R25bn loan led by Standard Bank for a fibre expansion initiative in late 2023. This marked the largest syndicated loan in SA’s telecom history, indicating that the group may outspend competitors in expanding its fibre network.

In 2022, Standard Bank backed MetroFibre Networx’s R5bn fibreoptic expansion through a similar arrangement.

Seacom, one of Africa’s largest undersea cable providers, recently received backing from the International Finance Corporation in the form of a $260m loan.

gavazam@businesslive.co.za