On March 22 Actis announced its second foray into telecom towers of 2024 with the acquisition of Telkom's Swiftnet, formerly known as Gyro Group, to create the third largest independent telecom tower platform in South Africa. Swiftnet has been valued at ZAR6.75 billion (US$355mn), no EBITDA or revenue figures has been reported thus far.
Who's buying
Actis is a a leading global investor in sustainable infrastructure and is acquiring a 70% stake in Swiftnet. To fulfill South Africa's Broad-Based Black Economic Empowerment requirements 30% of the towerco will be owned by Royal Bafokeng Holdings, the investment arm of Royal Bafokeng Nation.
The acquisition of Swiftnet is Actis’ latest exciting investment in the digital infrastructure sector in South Africa. Our strategy is to position Swiftnet as the leading independent towerco in this market. Providing the infrastructure to deliver universal telecommunications access across the country, including the roll-out of 5G connectivity, presents great growth prospects. Our deep understanding of the region and our global network of towers expertise provide the basis to create a strong performing platform with scale-up opportunities. We have a great track record investing in South African and digital infrastructure and look forward to working with the Swiftnet management team to unlock more success and growth going forward.
Actis announced a deal to acquire 1,800 towers from Telekom Srbija in January, buying 995 towers in Serbia, 725 in Bosnia and Herzegovina and 107 in Montenegro. The investment builds on Actis’ existing digital infrastructure portfolio in South Africa, where it invested in in fibre network operator Octotel in 2020. In Africa Actis also owns Rack Centre, making the fund a full spectrum investor in digital infrastructure. This is Actis’ ninth investment in the digital infrastructure sector, with more than US$1.5bn currently committed in the sector.
Actis has reported its ambition is to create a leading independent towerco in South Africa and to target co-location and build-to-suit with all of South Africa’s mobile operators. Swiftnet is described as having a unique tower footprint and Actis has indicated it plans to support rollout in rural areas. Competition is fierce in South Africa and build-to-suit has dried up in the face of major demands for energy capex, so a focus on rural networks may open up space for the towerco.
Swiftnet's journey to sale
It was in 2017 when Telkom moved its property and passive infrastructure into Gyro Group, the antecedent of Swiftnet. From 2017 until last year Gyro Group was engaged in a process of auditing and repairing its sites to make them ready for sale.
Aside from reinforcing sites and assessing capacity for lease up, Gyro Group had to clean up each site's paperwork. Because Telkom had been established as a state-owned enterprise its original tower network was partially built on public land, and partially built without the normal municipal permitting process. In both cases this led to lengthy landlord searches and negotiations.
Gyro Group reported whittling its tower count down from 6,200 to around 3,700 by consolidating sites, dismantling unused sites and discounting bare steel. Swiftnet has been sold as a towerco with over 4,000 sites across the country, but TowerXchange does not have a complete count of marketable sites for the newly acquired entity.
The platform is underpinned by a strong relationship with Telkom and other existing anchor tenants, and long-term contractual revenue. The deal allows Actis to invest in a growing sector, with strong secular tailwinds and an increasing need for tower densification driven by increasing internet penetration and the transitions from 3G and 4G to 5G.
South Africa's market
South Africa has been reeling from power outages for years now, and mobile operators have shifted attention from site roll-out to site resilience. MTN recently reduced their rollout plan from 500 to just 50, creating a challenging dynamic for newer towercos to win build-to-suit business. Telkom will be pleased to have offloaded its power challenges to a new partner, and to have another towerco that can build sites as and when demand arises. Telkom has lagged behind MTN and Vodacom in the South African market and the infusion of cash should allow it to invest in its network.
Actis joins over 30 towercos active in South Africa. American Tower entered the market in 2010, and were followed by Helios Towers and SBA Communications, who both entered the market by acquiring build-to-suit towercos. MTN's network was acquired by IHS Towers in 2021 and Vodacom carved-out its own towerco, Mast Services, in 2023. Telkom was the last piece in the puzzle of the final professionalisation of South Africa's telecom tower network, its now time for Swiftnet's new owners to go to work.
