Govt stake in Telkom “unhealthy” – analyst
Government’s increasingly active role in how Telkom is run is “very unhealthy” and may work against the telecoms group, according to Spiwe Chireka, telecoms program manager at research group, International Data Corporation (IDC).
Government owns 39.8% of Telkom, while the Public Investment Corp, which invests state employees’ pensions, holds a 10.9% stake in Telkom.
In May, Telkom announced that it had reached an in-principle agreement with Korea telecoms firm KT Corp regarding the terms of a venture that would see KT acquiring a strategic equity shareholding of 20% in Telkom by way of a specific issue of shares for cash at a cut price of R25.60 per new Telkom ordinary share.
However, the group was informed at the end of May, by Minister Pule, that the proposed transaction had been presented to the cabinet of the South African Government and that cabinet had taken the decision not to support the transaction as proposed.
Cabinet Statement on 1 June
“The Government of South Africa has adopted a policy position to beef up its infrastructure for the next seven years, particularly in rural areas.
“In considering the proposed deal between Telkom and South Korea’s KT Corporation, Cabinet took into account the fact that the Department of Communications is driving the Government policy of rolling out broadband, in partnership with the private sector, to all citizens by 2020.
“Telkom is a key and strategic asset in the rollout of this telecommunications infrastructure and in the effort to improve the skills of our citizens. Government recognise the need for Telkom to implement an urgent turn-around strategy, and to get the company back on its critical centre of delivering ICT services to all South Africans, new options will be considered by both Telkom and government in this regard.”
Cabinet asked minister of the Department of Communications, Dina Pule to report back to it about all the options that are available for Telkom in three months.
However, Siyabulela Qoza, spokesperson for Minister Pule, denied suggestions that the DoC has been tasked with coming up with a strategy for Telkom.
“It is inaccurate to suggest that the Minister is coming with a strategy for Telkom. Given the fact that government owns a majority stake in Telkom, and as is the practise in any other company, shareholders have a right to intervene and determine the strategic direction of such a company.
“This is ordinarily followed by strategy, which is the terrain of the executive management to develop and execute.
“The minister’s engagement with Telkom is done through the five government-elected board members. This is in line with the JSE regulations,” Qoza told BusinessTech.
“Unhealthy”
“It is important to note where government sits with Telkom at the moment. They do have a say in how Telkom is run. The DoC essentially looks after Telkom on behalf of government. Dina Pule is that person,” said Chireka. “It’s very unhealthy that government has that say. That is why nothing moves, we have seen this with local loop unbundling,” the analyst said.
“For the first time, we are seeing government playing a more active and transparent role in Telkom’s affairs, but I fear it may work against them (Telkom),” Chireka said.
At close of play on Friday, shares in Telkom were at R17.91 on the JSE – hovering around the company’s all-time low of R17.16 – with the group’s market cap only slightly above R9 billion as investors have lost confidence in the group following the KT deal block, talk of nationalisation and even a delisting from the Johannesburg Stock Exchange.
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