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<\/a><\/p>\nMany analysts highlighted that Telkom cannot cost-cut itself to growth, raising questions about the company’s growth prospects.<\/p>\n
Graeme K\u00f6rner from K\u00f6rner Perspective said the market is taking a dim view of Telkom’s prospects, especially its legacy fixed-line business.<\/p>\n
“Telkom’s traditional copper businesses are dying a slow but very clear death,” he said.<\/p>\n
Telkom’s fibre business is decent, but pricing is under pressure because new providers are rolling out infrastructure, and players like Rain are offering affordable 5G broadband services.<\/p>\n
“It has suddenly become a very crowded space. The bottom line is broadband prices are falling, and people are not prepared to pay what they used to for voice calls,” K\u00f6rner said.<\/p>\n
Apart from challenges around increased competition and lower margins, Telkom has been implicated in dodgy dealings.<\/p>\n
Last month, President Cyril Ramaphosa issued a proclamation directing the Special Investigating Unit (SIU) to investigate allegations of maladministration and misconduct at Telkom.<\/p>\n
It raises the question of whether Telkom’s assets are valuable enough to split the company up to unlock shareholder value.<\/p>\n
Telkom informed shareholders that its “value unlock programme”, which will see its masts and tower business \u2014 Swiftnet \u2014 listing on the JSE, remains on track.<\/p>\n
The company’s board believes that a separate listing of Swiftnet will affirm the valuation of the masts and tower business, thereby unlocking value for shareholders.<\/p>\n
K\u00f6rner said that while Telkom has a few valuable assets, you cannot asset strip the business if you do not believe in the company’s core.<\/p>\n
“There is also no guarantee that the asset value is going to be unlocked,” he said.<\/p>\n
He did, however, say the idea of breaking up Telkom into pieces and allowing separate management teams to focus on the different business units makes sense.<\/p>\n
“My sense is that the sum of the parts is worth a fair amount more than the current share price,” he said.<\/p>\n
Even if this strategy is implemented, K\u00f6rner warned, you are still going to inherit a mobile unit that struggles to compete against Vodacom and MTN, and a dying fixed-line business.<\/p>\n