Africa Digest News

South Africa’s telecom comeback story just earned a major vote of confidence as S&P Global Ratings lifted Telkom SA from BB to BB+, assigning a positive outlook that signals one thing: the turnaround still has room to run.

The upgrade mirrors South Africa’s own sovereign lift on 14 November and caps a two-year revival few thought possible for a company once drowning in debt and losing ground to faster rivals.

The catalyst is clear. Telkom’s R5.7 billion ($320 million) sale of its Swiftnet tower portfolio in March 2025 vaporised leverage, collapsing adjusted debt-to-EBITDA from 2.0x to 0.9x, a level S&P calls “exceptionally low” for the sector.

With margins widening, cash generation surging, and liquidity described as “robust,” the agency now sees Telkom holding leverage below 1.0x through the cycle.

Telkom, long overshadowed by Vodacom and MTN, had become a dying business by 2023 with nearly R20 billion ($1.1 billion) in debt, a fixed-line legacy dragging performance, and fierce competition from fibre leaders like Vumatel and Openserve.

Under CEO Serame Taukobong, the 2024 shift was blunt but effective: prioritise data growth, slash operating costs, and offload towers to cut debt.

The Swiftnet sale to a consortium backed by Actis and Old Mutual released R4.2 billion in net proceeds after debt settlement.

By FY2025 (to March), Telkom posted a 3.3% revenue rise to R43.9 billion, a 25.1% jump in EBITDA to R11.8 billion, and a 555% surge in free cash flow to R2.8 billion. Headline earnings per share doubled to 583 cents.

S&P’s timing aligns closely with South Africa’s own sovereign lift, driven by three straight primary budget surpluses, better-than-expected revenue, and inflation falling toward the 3.4% target.

As a Government-Related Entity (40% state-owned via the PIC), Telkom benefits from the sovereign’s improved risk profile, but crucially, its Stand-Alone Credit Profile (bbb-) still sits one grade above the country’s foreign-currency rating. S&P’s liquidity models show Telkom clearing stress tests with “room to spare.”

The positive outlook is the real headline: if leverage stays under 1.0x and GDP edges toward 1.5–1.8% in 2026, another upgrade is on the table.

What Drove the Upgrade

Swiftnet’s disposal was transformational. By selling more than 4,000 towers (leased back via long-term agreements), Telkom wiped nearly R10 billion in liabilities, redirected R3.5 billion into fibre capex, and sank leverage to levels far below domestic peers.

Vodacom sits around 1.8x, and MTN around 1.5–2.0x; Telkom’s 0.9x gives it strategic breathing room none of its competitors enjoy.

Operational discipline is visible everywhere: R1 billion in cost cuts, 5% lower opex, and rising fibre uptake (Openserve now passes 1.2 million homes). Free cash flow has flipped decisively positive.

S&P now assumes leverage between 0.8 and 1.0x through 2027, provided GDP stabilises near 2% and South Africa avoids another load-shedding relapse.

READ ALSO:What’s at Stake if MTN Acquires Telkom SA?

The upgrade lands in a telecom sector spending more than R100 billion on fibre and 5G capacity. Telkom’s low leverage means it can fund network expansion, dividends, and buybacks without straining the balance sheet, which is a rarity in the industry.

The JSE agreed: the stock rallied 15% in the week after the S&P announcement.

For investors, Telkom suddenly offers a credible 7% dividend yield, richer than the sector’s 5% average, backed by sustainable free cash flow instead of creative financing.

For the country, a stronger Telkom means cheaper borrowing for the wider R50 billion digital-infrastructure rollout and a healthier competitive landscape.

Rivals are watching closely. MTN and Vodacom may face pressure to defend yields, as Telkom’s balance sheet gives it pricing agility the others lack.

The Takeaway

S&P’s BB+ with a positive outlook is a formal recognition that Telkom has pulled off one of South Africa’s sharpest deleveraging acts in years, a move that not only rebuilt the balance sheet but also rewired the company for growth.

If macro conditions hold and leverage stays under 1.0x, Telkom may be eyeing another level before 2027.

The S&P credit Ratings Overview

The S&P credit Ratings list provides a comprehensive overview of issuer and issue ratings across global markets, helping investors assess risk and creditworthiness.

For deeper insight, many rely on the S&P Global Ratings review, which highlights methodologies and sector-specific updates.

All official information is available through the S&P Global Ratings website, including definitions of the S&P Global Ratings scale that ranges from AAA to D and guides market participants in evaluating credit quality.

Ronnie Paul is a seasoned writer and analyst with a prolific portfolio of over 1,000 published articles, specialising in fintech, cryptocurrency, climate change, and digital finance at Africa Digest News.