Telkom SA SOC Ltd sees an acquisition as one way to grow its mobile-phone business as the South African former landline monopoly looks to boost profit and attract higher-paying customers.<\/p>\n
Telkom has the balance sheet to pursue a deal, chief executive officer Sipho Maseko said in an interview at Bloomberg\u2019s Johannesburg office on Wednesday. While he didn\u2019t name a specific target, local rival Cell C Pty Ltd is on the group\u2019s radar, people familiar with the matter said in December.<\/p>\n
\u201cAn acquisition would be a good idea to acquire growth in the mobile business,\u201d said the CEO, who has run Pretoria-based Telkom for almost six years. \u201cYou have to be careful on what you acquire and what strategic purpose it will serve. Data is the new voice – you don\u2019t want to buy voice revenues.\u201d<\/p>\n
Under Maseko, Telkom has reduced its dependence on declining fixed-line voice calls to 25% of sales from 75%, the CEO said. That\u2019s been part of a wider shake up at the firm, which is still almost 40%owned by the government. Telkom is now profitable, pays a dividend and has more than halved the workforce from the 22,000 it employed when Maseko took over.<\/p>\n
Smaller Players<\/strong><\/p>\n Telkom\u2019s mobile business is the fourth-largest in South Africa behind Cell C in third; together they have about 21 million subscribers. That trails market leader Vodacom Group Ltd and its crosstown rival, MTN Group Ltd, which have a combined 73 million.<\/p>\n Closely held Cell C is seeking to expand into both fibre networks and financial services, where Telkom also has an interest.<\/p>\n While Telkom\u2019s stock has gained about 360% since Maseko joined from Vodacom in 2013, he\u2019s restructured the company into separately operating businesses to make its value easier for investors to calculate.<\/p>\n That \u201cprovides us with more transparency and accountability,\u201d said Maseko.<\/p>\n Telkom is worth more when you value each division individually, JPMorgan Chase & Co analysts including JP Davids, said in a note in November.<\/p>\n The shares have gained 45% in the past 12 months and traded 0.2% higher at R70.25\u00a0 as of 9:34 a.m. in Johannesburg on Friday. That values the company at R36 billion ($2.5 billion).<\/p>\n
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