Telkom SA Limited (JSE:TKG) News - Market update: Spectrum Auction

Telkom SA SOC Limited
Registration number 1991/005476/30)
JSE share code: TKG
JSE bond code: BITEL
ISIN: ZAE000044897

("Telkom" or “the Group”)

Market update: Spectrum Auction

Following the spectrum auction wherein Telkom obtained 20MHz of 800MHz and 22MHz of 3500MHz for
R2.1 billion, the Independent Communications Authority of South Africa (“ICASA”) confirmed the auction
fee that is due within 30 working days. The auction fee due is the full amount relating to 3500MHz and the
proportional payment for 800MHz that is immediately available.

ICASA will communicate an update on the full availability of the 800MHz, after 1 July 2022.

 Spectrum             Spectrum             Spectrum                 Auction fee due            Outstanding
                      frequency            acquisition cost         Within 30 working          Auction fee (due
                      bands                                         days                       after 1 July 2022)
 800MHz               20MHz                R1 504 815 407.10        R 532 704 654.12           R 972 110 752.99
 3500MHz              22MHz                R 608 800 000.00         R 608 800 000.00                      -
 Total                                     R2 113 615 407.10        R1 141 504 654.12          R972 110 752.99

Shareholders are advised that the payment of R1.1 billion is expected to be made in the current financial
year, impacting the current year debt level, capex spend and Free Cash Flow (“FCF”). Telkom year-to-
date FCF is in negative territory, tracking below its expectations. Notwithstanding the financial impact,
Telkom has adequate capacity on its balance sheet to fund the spectrum while maintaining sufficient
headroom of its loan covenants.

The long-term strategic benefits of the spectrum acquisition outweigh the short-term financial impact.
Since inception, Telkom Mobile has not owned sub 1 GHz spectrum. The 20MHz of 800MHz, once
available, will enable more efficient network deployment, increased coverage and capacity on the mobility
layer (FDD) resulting in improved user throughput and experience particularly in rural areas.

Telkom already leads the market with providing Fixed Wireless Access service. The acquisition of 22MHz
of 3500MHz will enable us to advance an enhanced 5G position through combining our existing 28MHz of
3500MHz to achieve a total of 50MHz contiguous spectrum in this band.

Whilst Telkom has been able to secure the much-needed sub 1 GHz in the spectrum auction, we were
constrained in our ability to acquire the amount of spectrum that we need to compete effectively. To secure
its ability to compete effectively in the mobile market, Telkom persists with its court application to ensure
that the licensing of spectrum promotes effective competition in the mobile market in line with the objective
of the Electronic Communications Act. Telkom’s application is set down for hearing on 11 to 14 April 2022
and the outcome may impact the auction and its outcome.

The above information has not been reviewed nor reported on by Telkom’s independent external auditors.
Centurion

28 March 2022

Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Date: 28-03-2022 07:05:00
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