Papi – why no Nitel
In a telephonic interview with Moneyweb , Molotsane said the Nigerian government had a reserve price that it was hoping to achieve and Telkom was forced to evaluate the environment and decide on what the 51% stake was worth to it.
Significant issues for Telkom, according to Molotsane, included:
- that there was considerable uncertainty over whether Nitel’s share in the SAT-3 undersea cable would have been included in the shareholding
- there were some pension fund liabilities and Telkom needed clarity around who would be responsible for these
- government had wanted some involvement in matters such as procurement
- there didn’t seem to be any commitment by the other shareholder – the Nigerian government – to invest in the business
There were six bidders short-listed to make an offer for the 51% stake in Nitel, including Telkom and MTN, but only Egyptian operator Orascom and a consortium named NewTel reportedly made an offer. And, although Orascom was the higher of the two, the Nigerian government put its nose up to the $256,5m bid, saying this was far below its reserve price.
Molotsane says that the process has now been called off means there could still be an opportunity to relook at Nitel, provided it could reach agreement on some of the issues of concerns.
He says Telkom will not expand into other markets simply because this is the fashionable thing to do. It will only do so if this expansion makes sense to shareholders and it can add value in the environment where the opportunity exists.
Molotsane says Telkom will also pursue opportunities in Kenya, the DRC and Angola, although these would be dependant on the time frames of the governments concerned. The approach in these markets would be to look at existing businesses, not to pursue greenfields opportunities. In some cases, these businesses might have mobile operations, and Telkom could pursue these with 50% subsidiary Vodacom. But, the latter possibility would be subject to its shareholders agreement around Vodacom. UK mobile giant Vodafone is in the process of increasing its stake in Vodacom to an equal 50%.
Molotsane says the shareholders agreement currently restricts Telkom from competing with Vodacom and Vodafone in Africa. But, he describes the shareholders agreement as “restrictive” and says Telkom is in the process of engaging with Vodafone in order to open up further opportunities for itself. This might include the possibility of changing the shareholders agreement, something that he describes as “imminently on the cards”.
Another opportunity, which might still be on the cards at a later stage, is the acquisition of Business Connexion, although Telkom refused to pay the price that Business Connexion’s management thought the business was worth last year. “We didn’t think it was worth what they valued it at…I think it is important for people to realise that we won’t go out of our way to overpay.”
Molotsane says it would still like to engage with Business Connexion’s management further and will pursue other opportunities, such as looking at smaller players. He won’t be drawn on price specifics relating to Business Connexion, but says the gap between what it was prepared to offer and what management wanted was “not that wide”.
Asked if a special dividend could be on the cards in the absence of a value-enhancing expansion opportunity in the short-term, Molotsane said he didn’t want to fuel any expectations, suffice to say that Telkom was mindful of the fact that a business that hung on to its cash would be punished. “You never know what could happen…we’re very prudent. If we’ve got the cash, we will use it wisely.”
Source: http://www.moneyweb.co.za
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