Analysts are divided over the likely future of Telkom once it sheds its 50% stake in Vodacom later this year.
Some expect Telkom to be acquired by a foreign operator, while others believe Telkom will be the one that does the acquiring. The only consensus is Telkom has to change its operations by teaming up with a mobile operator to offer a combination of fixed and mobile voice and data services. One source believes Telkom will merge with Cell C in a deal that sees Cell C’s majority owner, Saudi Oger, take a stake in Telkom.
“There’s a 60% probability that before the year is out they are going to come together because it doesn’t make sense for Telkom to roll out a wireless network. Saudi Oger could be glad to put Cell C into Telkom and take Telkom shares. They’d see it as the best way to grow value over time by letting the businesses grow together,” the source said.
But another source said a tie-up with Cell C would leave Telkom deficient as a mobile player since Cell C’s network lacked sufficient data carrying capacity.
“Telkom will be bought by a foreign company,” he speculated. “It could be Saudi Oger, but putting Cell C into Telkom would still leave a lot of work to be done. I’d watch for a couple of other Middle Eastern players or the Nigerians.”
Last year Nigerian cellular operator Globacom made a belated bid for Telkom so it could form a joint venture in SA by partnering with Telkom’s 50% stake in Vodacom. But its bid was too late to halt the deal now under way, which will see Telkom sell 15% of Vodacom to British operator Vodafone, and distribute the remainder of its 50% stake to its own shareholders.
Another speculator believes the pan-African mobile operator Zain will make a play for Telkom. Zain Africa’s CEO, Chris Gabriel, had been too vocal about his intention to get into SA for it not to launch a bid, he said, and Zain was rich enough to do so thanks to its Middle Eastern owners. Previous rumours that Zain would team up with Cell C were probably off the mark, he said, and it would make more sense for Zain to become Telkom’s mobile partner in SA.
What makes Telkom an attractive acquisition is its huge national network, and its ability to offer customers more data services over its fixed line infrastructure.
Telkom’s chief of global operations, Thami Msimango, would not be drawn on the rumours.
“I can’t deny that Telkom will be a very different company without Vodacom, but whether we will be acquired is not an area I’d like to dabble in”, he said. “Those that are looking at us obviously see the opportunities for Telkom as a company going forward without Vodacom, but there are opportunities we are pursuing in terms of our own growth strategies.”
Speaking at a Dimension Data conference yesterday, Msimango said that Telkom, like all fixed line operators, had to evolve or die. What will help it evolve is the R10bn it will pocket from the proceeds of selling Vodacom.
“Competitors are on our doorsteps so our business model is changing. Our weakness has been in the mobile business and we need to expand that.” For years Telkom had missed the opportunity of working well with Vodacom to offer a blend of services, he said.
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