Government dragging on Telkom – analyst
An analyst has accused government of “dragging Telkom” after the Department of Communications (DoC) delayed its expected presentation of an alternative strategy for the beleaguered firm to cabinet.
The DoC was due to report back to cabinet on Friday (31 August) regarding alternative options available for Telkom, following government blocking the deal between the telecoms firm and KT Corp at the end of June.
However, the department may only present its plan for Telkom next week. “This plan is scheduled to take place next week,” a spokesperson for the DoC told BusinessTech.
In May, KT Corp and Telkom agreed to 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.
“The Minister and her colleagues at the Inter-Ministerial Committee have worked very hard with government officials and Telkom to trim the list of option to three. These three options will be presented at the next Cabinet meeting that is scheduled for next week.”
“The Government views Telkom as a strategic asset in the rollout of ICT infrastructure in the country, and is moving with speed to find a lasting solution that will make Telkom sustainable,” the DoC said.
Shares in Telkom have slumped below R18 in the most recent session, having started the year R28.42.
Shares in Telkom had opened at R34.22 over the same period in 2011; however, poor results, a large fine over market abuse, and the KT block has seen investors lose faith in the group.
Spiwe Chireka, program manager of telecoms at research and analysis firm, the International Data Corporation (IDC) told BusinessTech:
“It is starting to appear as though the government blocked the KT deal without a concrete alternative plan. It is a known secret that Telkom desperately needs the money, and this is now typical of government when it comes to dealing with issues such as the one [regarding] KT.”
“One of the issues with Telkom is its ineffectiveness to compete against the private entities; and one of its main Achilles’ heels is delay and bureaucracy. The main culprit in all of this is the government,” Chireka said.
“While Telkom’s exco has made it clear it needs the money and done its part in securing a potential partner (KT), it is the government that seems to be dragging Telkom,” she said.
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