Government owned mobile operator has opened the books
South African mobile Telkom has confirmed it can afford the 2.1 billion rand (€129 million or $143.73 million) for bands of radio frequency spectrum it bought in a recent auction, despite the reports of negative free cash flow on Reuters, which lowered expectations.
The South African government has a 40 per cent stake in the telco and all the nation’s operators have been champing at the bit rates for new capacity. Some have waited at least ten years for spectrum licenses to be made available in order to cut their data costs, add 4G capacity and even roll out 5G capacity.
The main spectrum auction was due to take place earlier this month, but Telkom applied to the courts to block it on the grounds that the auction would not allow it to obtain the amount of spectrum it needed to compete effectively.
Rival mobile operator Rain won the first round of bidding in an auction held earlier in March. Now Telkom has purchased two ‘slices’ of 10 MHz in the 800 Mhz band, giving it access to frequencies below 1 GHz for the first time. This is a coup for the telco in its mission to improve internet coverage in underserved and rural areas and supply better indoor access. It also bought 22 MHz in the higher frequency 3500 MHz band.
Telkom said 1.1 billion rand (€68.25 million) of the total cost should be paid in its current financial year, which will affect its debt, capital expenditure and free cash flow. “Notwithstanding the financial impact, Telkom has adequate capacity on its balance sheet to fund the spectrum while maintaining sufficient headroom in its loan covenants,” said an official statement.