South African government doesn’t want to sell Telkom

Business Times reports that South African communications minister Mondli Gungubele does not want the government to reduce its 40% stake in Telkom.

Citing “numerous sources in and outside of government”, the paper reported that Gungubele is opposed to the concept, corroborating the minister’s recent statements that Telkom is still “strategic to the state’s programme.”

It remains unclear if Gungubele’s stance is shared by the rest of the cabinet, which will decide as a collective whether government retains its 40% stake in Telkom.

However, as a key roleplayer in the process, Gungubele’s stance will be a blow to those hoping to acquire control over the company.

Maseko’s attempt to take control

Former Telkom CEO Sipho Maseko led the most recent bid to acquire a substantial stake in Telkom.

His Afrifund organization and its partner, Axian Telecoms from Madagascar, presented an offer to the Telkom board in March, which was reportedly rejected.

According to Business Times, the consortium tabled a R12-billion deal at R46 per share for a 35% stake in the company.

The state-owned Public Investment Corporation reportedly supported this bid, but Telkom rejected the offer outright — as it believed the valuation to be too low.

Telkom’s share price was trading at around R38 per share at the time.

Maseko’s consortium has reportedly tabled a revised offer very similar to its original one. If this bid also fails, the consortium is expected to work directly with shareholders.

Telkom CEO Sipho Maseko
Telkom CEO Sipho Maseko

MTN interest

MTN is another possible buyer of Telkom, as it previously showed interest in acquiring the company.

While it has not indicated any intention to bid for Telkom again, MTN Group CEO Ralph Mupita previously stated that there remains a strategic rationale for consolidation between MTN and Telkom.

Mupita believes four mobile players are unsustainable in the South African market.

“You don’t see the third and fourth players having the capacity to invest in their networks,” Mupita said.

MTN Group CEO Ralph Mupita

“Twenty years ago, it was very different. Voice-centric networks did not require as much capital, which means you could have four to six players.”

“Right now, with data networks, it is quite challenging for a number three. It is the case in Nigeria and Ghana,” said Mupita.

However, Telkom Group CEO Serame Taukobong insists that Telkom doesn’t need a saviour to buy it — whether that be Maseko’s consortium, MTN, or another party.

Taukobong made the statement in Telkom’s recent annual financial results presentation, where the company withheld the dividend for another year and impaired its cash-generating units, Openserve and Telkom Consumer, by R13 billion.

He also said the company would not pay bonuses or raise salaries this year.

Now read: Sipho Maseko said Telkom was worth R108 per share — but only wanted to pay R46

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South African government doesn’t want to sell Telkom