Telkom rejects R12 billion offer – with MTN on standby: report

 ·11 Jun 2023

The Telkom board has reportedly rejected a R12 billion offer for a 35% stake in the company from a consortium led by former CEO Sipho Maseko.

As reported by the Business Times, Maseko’s Afrifund Investments and Madagascar-based Axian Telecom submitted their bid in March, which also requires the South African government to dilute part of its 40.5% state in Telkom.

Although the consortium made a R46 per share offer – a 20% premium on the R38 share price at the time – for a controlling stake in the embattled telecommunications company, the board rejected the offer as it was deemed too low and not in the best interest of Telkom’s shareholders.

However, sources told the paper that discussions are still underway and that a revised offer, which is not materially different from the original, has been offered.

In addition to this, the paper said that MTN is also still considering its options with the group and is mulling another bid.

MTN remains cautious after a bid to buy 100% of Telkom fell through in July 2022 after competing network Rain proposed a merger between itself and Telkom.

In July 2022, MTN offered R60 per share, and valued Telkom at R30 billion.

MTN group corporate affairs chief Nompilo Morafo said that no offer for Telkom has been made. However, analysts believe that MTN is interested in Telkom’s fibre network Openserve.

“Telkom is a business with good assets. MTN remains of the view that the offer made in July 2022 would have been good for shareholders of both companies and broader stakeholders,” Morafo said.

Telkom’s troubles 

Telkom previously warned that it is expecting a huge loss in its headline earnings for the full year ending 31 March.

In May, the group said that it expects its headline earnings per share (HEPS) to drop by between 85% to 105% from the prior period,

This would result in a HEPS decreasing between 489 to 604 cents per share, meaning a final number loss of 29 cents per share to earnings of 86 cents per share (2022: 576 cps).

Telkom said that the blow comes amidst marginal revenue growth emanating from migrating legacy to new generation technologies, intentional upfront investment in working capital for handsets and equipment, the costs of load shedding, and inflationary cost pressures.

The group added that costs associated with its retrenchment process – which will impact 15% of its staff – and impairment costs have impacted its balance sheet.

“A provision for the restructuring process, as set out in a SENS announcement released on 14 February, further impacted basic earnings and headline earnings in the current period. The expected impairment charge, estimated at R13 billion, impacts basic earnings in the current period,” the group said.

Telkom said that it will publish its annual results ended 31 March on approximately 13 June 2023.

Read: MTN bets big on wind and solar energy

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