Telkom Media value destroyed
Although the decision by Telkom to sell part or all of its 66% holding in pay-TV business Telkom Media was welcomed by analysts, the way it went about it seems to have been inherently value destructive.
By telling the market that the returns are effectively not expected to be what they’d hoped – although not in such forthright terms – Telkom has created the impression it doesn’t have a business case.
That despite Telkom CEO Reuben September’s best efforts to convince the market that the business case was still a good one – although payback periods on some other opportunities would be shorter – and that it was going to handle the sale with the utmost sensitivity.
As Omigsa’s Steve Minnaar put it roughly during question time at the “analysts’ day”: Why would Telkom not want to own the controlling share of a business that was going to make it lots of money?
It seems Telkom could have better preserved value by first selling it and then telling the market about it. It now seems likely any potential buyer would be able to pick the asset up for less than it may have been worth just days before. If there are any buyers, that is. Analysts were sceptical whether Telkom would be able to sell its stake, except perhaps to one of the other new licensees.
Of course, Telkom might have feared the news seeping into the market before it could tell, so chose the upper hand in terms of communicating with its shareholders. Telkom Media CEO Mandla Ngcobo says he couldn’t comment on Telkom’s announcement.
Another question is what will happen to some of the executives Telkom seconded to Telkom Media to help make that important strategic asset work? Among them Ngcobo, Rikus Matthyser (chief strategy and operations officer) and Lourens van Niekerk (chief financial officer).
Finweek
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