DoC D-Day for Telkom
The Department of Communications (DoC) was due to report back to cabinet on Friday (31 August) regarding alternative options available for Telkom, following a block by government of the deal between the telecoms firm and KT Corp at the end of June.
In May, KT Corp and Telkom agreed a deal whereby the Korean based telecoms firm would acquire a strategic equity shareholding of 20% in the post-issue ordinary share capital of Telkom by way of a specific issue of shares for cash.
Having blocked the deal on 30 June, Cabinet asked the minister of communications, Dina Pule, to report back to it about all the options that were available for Telkom, in three months.
A DoC spokesperson admitted that, while the deadline was set for Friday, the department was due to meet with cabinet on 6 September.
Statement on Cabinet decision
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 has asked Minister Dina Pule to report back to Cabinet about all the options that are available for Telkom in three months.
Nadim Mohamed, investment analyst and partner at First Avenue Investment, recently said that government’s options could include delisting Telkom in order to better fulfil its development agenda and national objectives regarding connectivity and universal access.
“There is speculation that government may even look to consolidate its other investments in Sentech and Broadband Infraco with Telkom. In our view, the decision by government on whether to restructure the company or not is most critical from an investment perspective,” he said.
Government owns 38.9% of Telkom — 51% if the Public Investment Corporation’s (PIC) stake is included.
PIC
Maqhawe Dlamini, general manager of equities at the PIC, said the investment firm did not take part in any strategic meetings the DoC may have had around Telkom in recent months, as its special status in Telkom fell away with the termination of the A and B share arrangement.
“The PIC is now an ordinary shareholder and, therefore, its participation could have raised ethical issues around selective disclosure of information by Telkom.
“The PIC is aware that government’s decline of the KT Corp deal was premised on the fact that no other turnaround options were presented. We therefore hope that Telkom would have closed that loop in the concluding process, so government can be in a position to make a final determination on Telkom. This would bring certainty to this investment, which would help investors decide on it,” the PIC said.
Telkom woes
On Thursday, Telkom said it would appeal the fine handed down to it by the Competition Tribunal earlier this month for abusing its dominance in the telecommunications market between 1999 and 2004.
The Tribunal imposed penalty of R449 million on Telkom in its case against the South African Value added Networks Services (SAVA).
“This is a very complex matter,” said Telkom Group CEO, Nombulelo Moholi. “We have indicated our intention to exercise our option to appeal. We will use the next forty days to seek opinion from senior counsel and will evaluate our position before the expiry of this period.”
Shares in Telkom declined 1,36% to R19.63 at close of play on the JSE.
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