How Telkom could go from queen bee to just another drone in the hive

[rpm]

http://mybroadband.co.za/news/Telecoms/1183.html

 

[antowan]

I would rather like to see Telkom split into a couple of tiny competing entities. This doesn't give me a tingle in the right spot to be honest.

 

[Wyzak]

There are only 2 problems with this idea:

1) I doubt the government will allow Vodafone to own 100% of Vodacom, and they will insist that +-30% are sold to black shareholders.

2) Why would the government want to sell its 38% share in Telkom to MTN? They've made it clear that they "need" to have control in Telkom in case a tsunami hits. They love having their fingers in all the pies.

As usual, the government stands between SA and affordable broadband.

 

[Glordit]

Anything state owned is a bad idea from the start...

IMO get rid of state ownership ALLTOGETHER! and let any and every ISP that wants to come to S.A, and let them kill each other to become king! It works in other countries but our redundent gov, fails to understand this...

 

[ic]

Article title could've been: 'How the Telkom demon might be slain'

Simultaneously, MTN will buy a stake in Telkom, giving it a way to expand its services to its customers in SA, and providing it with a platform in the fixed-line world. Conceivably, it would buy government’s roughly 30% stake, and perhaps more, turning it in effect into a subsidiary of MTN.

IMO the biggest stumbling block to a deal where MTN buys Telkodemonopolies, is that the de facto fixed line monopolistic beast currently provides backhaul links [fibre optic] for the base-stations of MTN's direct competitors [Vodacom & CellC] as well as MTN itself, now if MTN buys into Telkodemonopolies, then MTN has direct control over the QoS & SLAs associated with the backhaul links etc being used by Vodacom & CellC, and more importantly MTN can give itself preferential rates for the backhaul links that MTN uses, whilst hiking up the price of backhaul links currently used by both Vodacom and CellC...

 

[Oupoot]

The first assumption is wrong. Vodafone only needs another 1% of Vodacom to have effective control of it. And Telkom will not be happy with owning less than 50%. IMO that is where the negotiations are failing so far: Telkom wants to get rid of all 50% at as high a price as possible, but Vodafone is not willing to buy all 50% at current rates, or even a small discount (Its between paying $300mn and $10bn for essentially the same thing). There will most likely be a large BEE component in any deal - the only question would be what price do they pay for the shares.

Once Telkom sells their 50%, they become a takeover target if they dont get rid of the cash soon. One option is buying back shares, but even buying all their shares on the market, Telkom will still have huge amounts of cash on hand. Another option is acquisition of another telco/ICT company in SA or more likely in another African country.

MTN will only buy Telkom if it is in their long term interests, not only in their SA operations, but in their other African operations too. This may be a possibility if Telkom were to make major acquisition(s) of a fixed line operators in other countries in Africa (such as Nigeria). Otherwise i dont see why MTN should be interested in buying Telkom shares except to use Telkom's cash to pay off their own debt.

Telkom may be better suited to buy CellC (which could use a cash injection), giving it control of a cellular operator in SA, as well as pursuing investment opportunities elsewhere in Africa (fixed line and/or cellular). This scenario establishes Telkom as the 3rd telco operator behind Vodacom and MTN, with Neotel effectively becoming the 4th. I dont envision another competitor in this market, though there will be a buhch of smaller players providing different, more specialised services to the market such as IS, Verizon, VoxTelecoms, municipal networks, etc.

 

[Insider]

MTN GROUP
MTN Group Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1994/009584/06)
Share code MTN ISIN ZAE000042164
("MTN" or "the Company")
CAUTIONARY ANNOUNCEMENT
Shareholders are advised that MTN is in discussions with Telkom SA Limited
("Telkom") which may or may not result in a transaction involving certain assets
of Telkom ("Proposed Transaction"). It should be noted that these discussions
are at a very preliminary stage. Should the Proposed Transaction materialise, it
may have an impact on the MTN share price.
Accordingly, shareholders are advised to exercise caution when dealing in MTN
securities until a further announcement is made.
Fairland
3 September 2007
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 03/09/2007 15:26:21 Produced by the JSE SENS Department.
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