Fixed line incumbent Telkom launched its mobile business in October 2010 and was privatized in 2013. Telkom’s turnaround strategy remains on track, and its share price has better than doubled in the last twelve months. Telkom has just over 2mn mobile subscribers, representing 2% market share, and is in the early stages of rolling out LTE-Advanced.
While Telkom’s passive infrastructure sale process is of interest in it’s own right, of even greater interest could be the implications of a Telkom sale for South Africa’s other operators, particularly MTN. MTN had been discussing a network agreement with Telkom (discussions believed to be ongoing), while MTN had been on the brink of selling their own ~6,000 towers to American Tower in 2013, before ultimately stepping back from the deal. Could a Telkom transaction prompt MTN to re-evaluate their own timetable to divest their South African towers? Vodacom denied interest in selling their South African towers as recently as September 2014, but if MTN or Vodacom did decide the time was right to sell towers, they’d have no shortage of bidders.
Towercos own just 13% of South Africa’s estimated 17,200 telecom towers, making the country the least penetrated of SSAs most attractive tower markets. Two of Africa’s ‘Big Four’ towercos are in South Africa, plus a handful of ‘middle market’ towercos. Eaton Towers has around 170 BTS sites and boasts a tenancy ratio over two, and are joined by American Tower, which owns and markets 1,912 towers, 1,400 of which were acquired from Cell C back in 2010 in a US$430mn deal.
Every towerco in SSA would doubtless take a long, hard look at any substantial tower opportunity in South Africa, as would several international towercos, although those with African dirt under their fingernails would likely be in pole position.