Telkom to spin off data centre business in major shake-up

Telkom’s ICT services business BCX will spin off its data centre business into another Telkom subsidiary, Gyro, and the telecommunications group may then seek external investors.

That’s according to Telkom CEO Sipho Maseko, who said in an interview with TechCentral following the publication of the group’s interim financial results on Tuesday, that the idea is to create a “vendor-neutral” data centre business. He explained that the new business will be kept at an arm’s length from Telkom, managed independently and will not make decisions that favour Telkom over third parties that will be encouraged to lease space in the facilities.

Vendor-neutral data centre operators, such Teraco Data Environments, South Africa’s largest, are not typically owned by or aligned with telecommunications operators. Rather, they act as neutral environments where operators, Internet service providers, content companies can interconnect freely with one another.

Maseko said Telkom has made important moves to separate key businesses from its core, including Openserve (its wholesale division, where a limited structural separation has begun) and Gyro, its property management and masts & towers business, which is actively leasing space on its high sites to other service providers.

“Openserve is not even five years old as a brand. Before that, we were never trusted to be agnostic to all the retailers,” Maseko said, referring to third-party Internet service providers that using Telkom’s fixed-line infrastructure to offer broadband services to end users. “We’ve been able to achieve that credibility in the market. The same goes for masts and towers. We created a separate brand (Gyro) and we forced that vendor neutrality.”

Second asset class

He said the data centre business – which must still be named – will be the second asset class housed under Gyro.

“Gyro has built sufficient credibility to be vendor neutral. BCX will be a tenant; maybe Openserve will be a tenant. Transparency is something we are committed to. Over the last few years, we have shown you can bank on our word on that,” Maseko said.

BCX employees directly involved in data centre management will be transferred to the new business; employees providing IT services to clients using the data centres will remain with BCX.

Maseko said that by the end of Telkom’s financial year in March, he wants to have completed the “carve-out” of the data centre business. It is then likely to seek outside investors. How much equity it sells in the new business will be dependent on how much upside Telkom believes there is.

“The timing of when we exit that will be consistent with our value-unlock strategy. If our shareholders will be better off if we sell most now, that’s what we’ll do. If our shareholders will be better off if we sell a portion now and another portion in five years, we will consider that, too,” he said.

He added, however, that selling a stake in the data centre business will be about “much more than just money” and that there must be “strategic alignment”. Prospective investors must be intent on reinvesting in it and growing the business, he said.  — © 2020 NewsCentral Media