Business Telecoms11.06.2023

Telkom rejects former CEO’s bid for controlling stake in company

Telkom CEO Sipho Maseko

A bid led by former Telkom CEO Sipho Maseko to acquire a share in the telecoms company was rejected, Business Times reports.

The publication has learnt that Maseko’s Afrifund Investments and its partner Madagascar-based Axian Telecom had offered R46 per share for a controlling stake in Telkom.

The operator’s board immediately rejected the bid for being too low. According to the report, Axian and Afrifund presented their offer in early March 2023 when Telkom’s share was trading at around R38.

The price of a Telkom share was R29.81 by the close of the JSE on Friday, 9 June 2023. The highest price it has closed at in the year-to-date is R38.50.

Citing well-placed sources, Business Times reported that the parties were still in discussions, and a new offer has been put on the table.

However, it is not materially different from the previous offer.

The consortium plans to develop a pan-African telecoms infrastructure operator out of Telkom, with Axian having the ambitious goal of becoming Africa’s fifth-largest telecoms company in the next five years.

However, the partners are facing a potential challenge from MTN, which has previously shown interest in acquiring Telkom.

Business Times reported that MTN was mulling a revised bid after it previously offered to buy 100% of Telkom for shares or a combination of cash and shares in MTN.

The two companies had been in discussions over the potential acquisition for several months in 2022.

Those negotiations were complicated by Rain proposing a merger with Telkom and putting itself on offer to the company’s board in exchange for newly-issued shares in Telkom.

MTN walked away from the deal, with Telkom telling shareholders it was because it would not give assurances that it was in exclusive discussions with MTN.

However, insiders told MyBroadband that MTN had asked Telkom not to consider the deals concurrently. This is because handling multiple proposals at the same time slows negotiations down, they said.

In January 2023, Telkom informed shareholders it terminated discussions with Rain because a deal was impossible.

Soon after, MTN Group CEO Ralph Mupita said that the strategic rationale for consolidation between MTN and Telkom remained.

According to sources who spoke to Bloomberg, IHS Holding has recently weighed a bid to buy Telkom’s Swiftnet towers unit. MTN holds a 26% stake in the New York-listed company.

Telkom’s deep financial troubles could dent deal

Business Times reports that MTN previously offered Telkom R60 per share, coming to a total value of R30 billion.

However, Telkom’s share price was significantly higher during MTN’s negotiations.

Since that time, the company has faced several financial challenges.

Recently, Telkom warned shareholders it is likely to report a significant decline of 465% to 485% in basic earnings per share for the 2022/2023 financial year.

On a normalised basis, BEPS is expected to decline by 70% to 90%, and headline earnings per share is expected to decrease by 60% to 80%.

Telkom has been less resilient to load-shedding, low economic growth, and high interest rates than Vodacom and MTN.

It has also struggled to keep up technologically, having only launched 5G towards the end of last year, more than two years after the bigger players.

Illustrative of its deep financial troubles is its planned R13 billion impairment on Openserve, Telkom Consumer, Gyro, and BCX.

While industry analysts don’t believe MTN would be willing to match its previous offer, it could still outbid the Maseko and Axian consortium.

Telkom is set to announce its annual results for the 2022/2023 financial year on Tuesday, 13 June 2023.


Now read: South Africa’s biggest telecoms companies

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