Will PIC go for state Telkom shares?

The Public Investment Corporation is keeping mum on whether it is a possible buyer should the government decide to dispose of all or part of its 39.7% stake in Telkom to pay for its R2.2bn bail-out of South African Airways.

The Public Investment Corporation (PIC) is keeping mum about whether it is a possible buyer should the government decide to dispose of all or part of its 39.7% stake in Telkom to pay for its R2.2bn bail-out of South African Airways (SAA).

Finance Minister Malusi Gigaba has given an undertaking that the bail-out, which was necessary to repay a loan to Standard Chartered Bank that the bank refused to extend, will be budget neutral in the current financial year.

This will require the sale of an easily disposable asset — such as the government’s stake in Telkom. A similar strategy was used in 2015, when the government sold its 13.9% stake in Vodacom to the PIC for an undisclosed sum to fund its R23bn allocation to Eskom.

Responding to a question as to whether the PIC would be interested in purchasing an additional stake in Telkom, spokesman Sekgoela Sekgoela said: “It would be inappropriate for the PIC to express itself publicly on market-sensitive information likely to impact on the value of shares.

ANY INVESTMENT DECISION THE PIC TAKES WILL HAVE TO BE IN LINE WITH ITS CLIENTS’ MANDATE

“In principle, any investment decision that the PIC takes will have to be in line with the mandate of its clients.”

The PIC is wholly owned by the government and acts as investment manager for the Government Employees Pension Fund, the Unemployment Insurance Fund and the Compensation Commissioner and has about R2-trillion in assets under management.

It already has a stake of about 7.7% in Telkom.

Telkom produced a “solid performance” in the year to March 2017, with group revenue up 9.8% to R41bn and headline earnings per share rising 12.4%.

It declared a 56% higher dividend for shareholders, which caused a sharp rise in the share price. It has been pursuing a turnaround strategy over the last three years, cutting staff costs and investing heavily in fixed and mobile broadband infrastructure, but according to analysts still faces challenges in its fixed-line business.

DA deputy finance spokesman Alf Lees said he had no problem with any sale of shares to the PIC as long as it was a commercially sound deal and not a case of offloading “dead ducks” onto the investment manager. “It has to be a business decision based on proper due diligence rather than a political decision,” Lees said.