The South African telecoms company that lost R18 billion

The market capitalisation of partially state-owned telecoms company Telkom has dropped by nearly R18 billion in the past six years, after reaching R37.21 billion in June 2019.

The company’s market cap as of 19 May 2025 was R19.42 billion. Before reaching R37.21 billion in June 2019, its previous half-year high was R36.97 billion in June 2007.

However, the period that followed its heights in mid-2007 saw Telkom’s value decline significantly, dropping to R4.65 billion in June 2012.

A company’s market cap is calculated by multiplying its share price by the number of shares it has in issue.

The sharpest decline in Telkom’s half-year market cap figure was observed between June 2008 and June 2009, when the figure plummeted from R32.62 billion to R8.79 billion.

A look at Telkom’s share price for that period shows a substantial drop in value in early to mid-May 2009 — around the point the telecoms giant sold its 75% stake in Telkom Media to Shenzhen Media.

The deal was critical to Telkom Media’s survival, as the South African company was looking to wind up the entity at the time.

“In a final attempt to prevent the winding-up of Telkom Media, Telkom launched an accelerated sale process for Telkom Media shareholders’ equity and loan accounts,” said former chief of strategy Naas Fourie.

“Shenzhen agreed to procure Telkom Media and to change its name within 30 days of closing.”

The sale came around the same time as Telkom unbundled its stake in Vodacom.

Vodacom launched South Africa’s first GSM network in 1994. It was a joint venture between Telkom, which owned 50%, Vodafone, which held a 35% stake, and Johann Rupert’s Rembrandt Group, which had 15%.

In 1996, Vodafone and Rembrandt sold a 5% stake in Vodacom to BEE company Hosken Consolidated Investments Limited (HCI), for R118 million.

Roughly six years later, HCI sold its 5% stake back to Vodacom and a restructured Rembrandt entity called VenFin for R1.5 billion, resulting in a 1,171% profit — one of the most lucrative BEE deals in history.

Telkom passed on the opportunity to buy VenFin’s stake in Vodacom in 2005, which Vodafone snapped up for R16 billion.

A few years later, Telkom said the joint 50% shareholding wasn’t working. The share agreement also prevented the company from launching its own mobile operator.

In 2008, it sold 15% of its stake in Vodacom to Vodafone for R22.5 billion. The remaining 35% was to be distributed to its shareholders by listing Vodacom on the Johannesburg Stock Exchange.

The government is Telkom’s major stakeholder, so it had to approve the deal. Former President Thabo Mbeki’s administration first proposed the sale.

However, he was recalled as state president before it could be finalised.

Kgalema Motlanthe gave final approval for the sale in the months he served as president before South Africa’s 2009 general elections.

Telkom’s biggest business blunder

The partially state-owned company’s decision to sell its Vodacom stake was an unmitigated financial disaster.

It sold its 15% stake for R22.5 billion in 2008, valuing Vodacom at around R150 billion.

Vodacom’s market value today is R279 billion, meaning Telkom’s 15% stake would be worth R42 billion — more than double Telkom’s current market cap.

While Telkom got a reasonable price from Vodafone, that ignores the 35% stake it unbundled to shareholders, which would have been worth nearly R140 billion today.

Telkom also distributed half of the proceeds from selling the 15% stake to shareholders through a special dividend.

Telkom then invested billions in building its rival mobile network operator, 8ta.

However, it would never have been able to catch up with investments Vodacom and MTN had made in their networks, and 8ta also pulled focus away from its fixed-line business.

Telkom’s value recovered between 2013 and 2019. However, its market cap plummeted again at the end of 2019.

In June 2019, its market cap reached R37.21 billion, but by June 2020, it had dropped to R14.73 billion.

Towards the end of 2019, the network operator experienced a period of significant financial challenges and transformation efforts.

Its mobile operations were performing well, but its fixed-line business was struggling due to continued lessening demand for fixed-copper-based services, and its failure to capitalise on its dominance in the fixed-line space.

While it has previously held a dominant position regarding fixed connectivity, Vumatel burst onto the scene in 2014 and had overtaken Telkom’s wholesale fixed-line division, Openserve, by 2019.

As a result, its overall financial performance declined.

The chart and table below track Telkom’s market capitalisation from June 2003 to June 2024.