Telkom wants to sell part of fibre giant Openserve

Telkom says “various initiatives are underway” to sell a minority stake in Openserve, its wholesale and network division.

This follows the legal separation of Openserve to a stand-alone entity on 1 September 2022.

In a trading update with its quarterly results on Tuesday, Telkom said it had received several unsolicited approaches for Openserve.

“[Telkom] is currently undertaking a market-sounding exercise to test the breadth of interest for this deemed to be core business of Telkom,” the company said.

“With adequate interest, a formal process will be launched by the end of the 2023 financial year.”

The potential sale of a minority stake in Openserve comes as Vodacom and Remgro-owned CIVH hope to conclude a deal that would merge the mobile operator’s fibre assets with those of Vumatel and Dark Fibre Africa (DFA).

Community Investment Ventures Holdings (CIVH) has already spun out Vumatel and DFA into a new holding company called Maziv in anticipation of the deal.

Should the Competition Commission green-light the deal, Vodacom would acquire 30% of Maziv’s assets for around R13.2 billion.

While CIVH will retain 70%, the stakes will be co-controlling. Vodacom also has the option to increase its stake to 40%.

Vodacom said its fibre network would immediately become open access like Vumatel and DFA’s once it is rolled into Maziv.

Vumatel is currently South Africa’s largest fibre-to-the-home provider by homes passed and connected, despite Telkom’s historical dominance in fixed-line broadband.

However, Openserve’s fibre network dwarfs its competitors when looking at the amount of cable in the ground — over 169,000km compared to Vumatel and DFA’s combined 44,000km.

As a result, Openserve is an attractive buy for a company like MTN that wants to ensure it remains competitive if Vodacom’s Vumatel deal succeeds.

Last year, MTN entered into negotiations to buy Telkom in return for shares or a combination of cash and shares.

However, Rain sunk the talks with its own proposal — it wanted Telkom to buy Rain for newly issued shares in Telkom.

When Telkom couldn’t assure MTN it would consider the deals separately, or provide a timeline for how long it would take to evaluate Rain’s proposal, it walked away from the negotiating table.

Since then, MTN Group CEO Ralph Mupita said the strategic rationale for consolidation between MTN and Telkom remains.

However, he would not comment on starting discussions with Telkom again.

Now read: Telkom announces retrenchments

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Telkom wants to sell part of fibre giant Openserve