Telkom does not need foreign money: minister

Communications Minister Dina Pule says Telkom does not need foreign direct investment to achieve its turnaround strategy — all it requires are skills and competency‚ Business Day reported Tuesday (17 July).

The Cabinet in May rejected a R2.68 billion deal proposed by South Korea’s KT Corporation to buy a 20% stake in SA’s largest fixed-line telecommunications operator and gave Pule three months to come up with an alternative strategy for Telkom.

Replying to parliamentary questions from opposition MPs yesterday on why the deal was scuppered‚ Pule said Telkom was a key component in the government’s efforts to improve skills and ensure its target of 100% access to broadband coverage was achieved by 2020.

The government owns 38.9% of Telkom — 51% if the Public Investment Corporation’s stake is included.

Pule said the Department of Communications was driving the government’s policy to roll out broadband. The implication was that Telkom’s turnaround strategy would be closely linked to the broadband plan.

Last week‚ the Treasury issued invitations to international and domestic banks and to the telecoms sector to take part in a “market sounding” on July 25-27 on achieving 100% coverage.

The departments of communications and public enterprises and the telecoms regulator‚ the Independent Communications Authority of South Africa‚ would attend.

The Presidential Infrastructure Co-ordination Commission‚ chaired by President Jacob Zuma ‚ had identified broadband as one of 17 strategic infrastructure projects‚ the invitation said.

Only about 2% of South Africa’s 50-million people have access to fixed-line broadband‚ 4% to mobile personal computer broadband‚ and 17% have access through their cellphones.

Dina Pule
Dina Pule

The Treasury did not respond to questions about its market sounding yesterday. Analysts said the private sector remained confused over which government department was driving the broadband strategy.

“National Treasury seems to be stepping in and doing what the Department of Communications says it is doing‚” Dominic Cull‚ a telecommunications regulatory lawyer‚ said yesterday.

He said that the “vague reasons” given for scrapping the KT deal did not satisfy the telecoms sector’s need for clarity on what the government intended to do to extend fixed-line services in South Africa‚ or whether that would happen through Telkom.

Avoir Research telecommunications analyst David Lerche said the key to the KT deal was “the smart people from Korea who would help Telkom. KT did amazing things in rolling out broadband in Korea.”

He said the rationale behind the argument that Telkom did not need additional capital was sound. Telkom’s recent decision not to pay dividends for the next three years meant its cash resources would be more readily available.

“If that could be extended to four years‚ it would bring Telkom close to what the KT deal would have brought in anyway‚” Mr Lerche said.

Congress of the People MP Juli Kilian said she was concerned that Pule had said in her reply that Telkom did not need foreign investment. “This could be nationalisation by stealth‚” she said.

Democratic Alliance MP Marian Shinn described the Treasury’s invitation as “rushed”‚ with companies being given only two weeks to respond.

“It seems unrealistic to expect considered responses from the industry in such a short time‚” Shinn said.

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Telkom does not need foreign money: minister