Telkom shareholders eye huge windfall
Shareholders of Telkom are in for a massive windfall if the fixed-line network operator decides to pay a special dividend from the proceeds of selling its 15 percent stake in Vodacom.
Experts say the shareholders are likely to demand the dividend.
Last week Telkom said Vodafone had offered R22.5 billion for the stake. The deal was supported by Telkom’s board and its largest shareholder, the government.
Vodafone and Telkom each own 50 percent of Vodacom.
However, when the deal was signed, the offered price excluded Vodacom’s net debt, Telkom said.
The debt is estimated to be more than R5 billion. This might include Vodacom’s acquisition in August of Gateway Communications for $700 million (R6.6 billion at the current exchange rate).
Richard Ferguson, a telecoms analyst at Nomura in London, said on Friday that Telkom might use the money to invest in its expansion plans, which included building a wireless network.
“This is going to be a big issue,” he said. The government “aims to promote economic and social goals and might demand the dividends [to invest in government-led projects]”.
Ferguson added that if a compromise was reached, Telkom might divide the proceeds – in other words, pay special dividends and invest in expansion projects.
Khulekani Dlamini, a portfolio manager at Renaissance Specialist Fund Managers, said special dividends were likely to cause consternation: Telkom management would seek to keep most of the capital, while shareholders would argue for the cash to be returned to them so they could deploy it as they saw fit.
“In this environment, there are a lot of good quality companies that are trading cheap, and most shareholders would prefer not to have the cash reinvested on their behalf, but rather to have it paid out so they can make their own investment decisions,” Dlamini said.
Shares of Telkom were 0.18 percent higher at R108.50 on Friday.
If Telkom uses the remainder, estimated at R17.5 billion, to pay special dividends, the three major shareholders could walk away with a combined R10 billion.
The government might receive R6.8 billion and the Public Investment Corporation could take about R2.6 billion, while empowerment group Elephant Consortium could pocket more than R1 billion.
The transaction would increase Vodafone’s stake to 65 percent, while the remaining 35 percent would be unbundled to Telkom shareholders.
This will result in the listing of Vodacom on the JSE.
Telkom shareholding discussion
Business Report
Loading ...