Telkom kickstarts 2018 competitive drive with R1bn bond sale

By Renee Bonorchis and Loni Prinsloo

(Bloomberg) – Telkom SA SOC Ltd. raised R1 billion ($83 million) in its first debt issue of the year as South Africa’s biggest landline provider looks to invest in its network and take on rivals including MTN Group Ltd. and Vodacom Group Ltd.

A sign stands at the entrance to the Telkom SA SOC Ltd. head office in the Centurion district of Johannesburg. Photographer: Waldo Swiegers/Bloomberg

After a five-year hiatus, Telkom started selling debt again in 2017 and has raised R4.3 billion from nine bonds in 12 months. The Pretoria-based company has significantly increased capital expenditure in recent years to focus on its mobile-phone business, which reported a maiden profit in 2016 as landline use declines.

Telkom has sold bonds to diversify its funding sources and reduce the cost of borrowing, a spokesman said Tuesday. The company is almost 40 percent owned by the South African government.

While Telkom’s mobile-phone business trails MTN, Vodacom and Cell C Pty Ltd. in Africa’s most industrialized economy, the unit is adding customers and needs investment to cope with the additional traffic. That’s put some strain on the company’s cash reserves. The operator is also expanding in broadband services, especially to corporate customers, following the acquisition of Business Connexion in 2016.

Monday’s bond sales included a R654 million floating-rate note maturing in March next year and a R346 million bond with a 7.84 percent coupon, maturing on Sept. 21.

Telkom shares rose 0.4 percent to R52.29 as of 1:59 p.m. in Johannesburg, valuing the company at R26.7 billion.

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