Telkom’s big plan to become a real estate company
Telkom has released its annual report for the year ended March 2017, detailing how the company plans to move forward in the coming year.
Group chairman Jabulane Mabuza, highlighted several challenges facing the group in the 2018 financial year including a deteriorating economy following South Africa’s sovereign rating downgrades, while the country has also moved into a technical recession.
“The economic output of South Africa is shrinking rather than growing. In a country like ours, where unemployment levels are close to 28 percent and one out of every two young people will not find a job, a decline in economic activity deepens the socio-economic crisis we are facing.
“More than 17 million South Africans rely on social welfare grants to survive. A recession has the potential to impact every South African, and presents significant risk to our businesses,” Mabuza said.
“Our economy needs to grow for the government to be able to meet the needs of the people who find themselves at the very fringes of the economy. Telkom needs to balance these
challenges with investment for future growth in our key areas such as fibre, mobile and new business ventures,” he said.
And while quiet on the topic until now, one of those new business ventures relates to plans it has for recently spun out subsidiary, Gyro.
As of 1 April 2017, Gyro was made responsible for managing masts and towers on behalf of the group.
This includes optimising, improving and maintaining the current portfolio of towers as well as building new towers according to market demand.
According to Telkom latest report this will also include commericalising excess capacity for investment purposes as well as commericialising the subsidiary’s internal corporate real estate services.
“The M&T business will be sold as a going concern,” Telkom said.
“Included in the M&T business are contracts, licences, M&T fixed assets and free right of use on Intellectual Property (IP), all of which is currently used by the M&T business. The 40 properties consist of technical, commercial and industrial properties owned by Telkom.”
Gyro will also effectively act as a broader realtor for the group, and is in charge of maximising the value of the group’s property portfolio.
According to Telkom’s report, the group currently has R25.5 billion in property, plant and equipment assets.
As part of its financial outlook, the group noted that its EBITDA margin of 23% to 25% implied contraction in margins as a result of an increase in its operating expenditure investment in subsidiaries including Gyro, VS Gaming and supporting its mobile business.
However it noted that Gyro’s acquisition in particular was likely to prove a solid long-term investment for the group.
“Our benefit from the gain on sale of assets will reduce from the previous year, as we focus on extracting long-term value from the balance of our property portfolio,” Telkom said.
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