Telkom to Partner With South Africa as Assets Attract Buyers

2023-07-26 22:18

Telkom SA SOC Ltd. and the South African government are in advanced talks to partner in rolling out

Telkom SA SOC Ltd. and the South African government are in advanced talks to partner in rolling out broadband products even as buyers flock to bid for the telecommunication company’s assets.

The partnership will involve Telkom’s businesses such as the Openserve fiber unit, the government’s Broadband Infraco SOC and broadcast transmission services provider Sentech SOC Ltd., Minister of Communications and Digital Technologies Mondli Gungubele said.

“We have almost agreed on how the partnership will work, we are at modalities now,” Gungubele said in a media interview at Telkom’s offices in Pretoria. The government isn’t interested in selling its 40% stake in Telkom, the minister said.

Telkom, which reported its first loss in a decade in the year ended March 31, has seen a flurry of proposals to acquire the company’s assets just as South Africa’s third-largest wireless company warned of a potential asset write-down of about 13 billion rand ($740 million).

The latest offer saw the firm’s former Chief Executive Officer Sipho Maseko offering to acquire a 35% stake in Telkom, with partners Axian Telecoms and the Public Investment Corporation to form a larger African infrastructure and telecommunications business. MTN Group Ltd., Africa’s largest wireless carrier, also made an offer for Telkom last year.

“We cannot stop people in being interested in Telkom,” Chairman Geoffrey Qhena said in the interview along with the minister. “When the share price is low people want to take advantage.”

Telkom shares have dropped 33% over the past 12 months, valuing the company at about 15.3 billion rand. They fell as much as 5.4% on Wednesday, the most in more than two weeks.

In March, Telkom said it was seeking to sell a stake in Openserve and hired Bank of America Corp. to gauge interest from investors. The business operates around 170,000 kilometers (106,000 miles) of fiber and legacy landline copper cables. The government’s Broadband Infraco manages 14,862 kilometers of fiber, making it the second-largest fiber network operator in the country, according to its annual report.

The new partnership would assist the government fulfill its ambitions to connect 80% of South Africans in the next three years, Gungubele said, without giving details.

“The relationship we have with Telkom as a shareholder has huge potential to turn the country’s future around,” the minister said.

--With assistance from John Viljoen.

(Updates with company shares in fifth paragraph.)