Telkom performance concerns large shareholder
The Public Investment Corp (PIC) says it is concerned by Telkom’s performance, and subsequent slide on the Johannesburg Stock Exchange (JSE).
Government owns 39.8% of Telkom, while the Public Investment Corp (PIC), which invests state employees’ pensions, holds a 10.9% stake in the telecoms operator.
Telkom listed on the JSE on 4 March 2003, and for the year ending March 2003, its market capitalisation stood at R16.2 billion.
For the year ending March 2006, Telkom had seen its market cap grow to R87.5 billion, and in 2007, that improved further, to R88.454 billion at a share price of R175.50.
At close on the local bourse on Tuesday (31 July), shares in Telkom rallied 53 cents, or 3.04%, but still sat at a price below R18 (R17.96), giving it a market cap of R9.35 billion.
The group declared a dividend of R6.60 for the year ended March 2008, having declared a dividend of R6.00 in the prior year, along with a special dividend of R5.00. In 2012, the group opted not to declare a dividend.
Maqhawe Dlamini, head of equities at the PIC told BusinessTech: “The performance of Telkom as a company has indeed raised concerns at the PIC. The share price decline is a reflection of the negative investor sentiment around this company and its future potential, under the current circumstances.”
“To this end, the PIC has been in contact with Telkom management who have updated us on the current state of affairs, post the turning down of the KT deal by government,” Dlamini said.
On 8 May 2012, Telkom announced that it had reached an in-principle agreement with KT 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 advised shareholders on Friday, 1 June 2012, that the potential strategic venture with Korea Telecom Corporation would not go ahead after a block by Cabinet.
On Friday 13 July, Telkom withdrew its cautionary announcement, effectively ending any hope of a deal with KT Corp.
Dlamini maintained that Telkom has a strategy in place, “but execution risks dictate that a tie up with a strategic partner would minimize these risks and assure the successful rollout of the turnaround strategy.”
The equities lead noted that Telkom’s chosen strategic partner, KT Corp, is not only a market leader in the telecom industry in Korea but also a leader in the areas that Telkom has identified as key to its strategic plan, i.e. convergence and broadband penetration.
“Telkom presented their turnaround strategy to government, including their proposed strategic partnership with KT Corp.”
“The government would however like Telkom to present more strategic turnaround options on the table, in order for the KT Corp proposal to be weighed against other possible options. This will increase the government’s conviction in their choice at the end of the day, which is perfectly reasonable.
“That engagement is ongoing,” Dlamini said.
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