Gov­ern­ment Telkom

Finweek English Edition - - TECHNOLOGY -

Ru­mours sug­gest­ing that the South African gov­ern­ment was con­sid­er­ing a pos­si­ble sale of its shares in Vodacom and Telkom re­sulted in a dip in the share price of both en­ti­ties.

The en­su­ing s el l- off i ndi­cated that in­vestors were nervy about the spec­u­la­tion, which pointed to t he gov­ern­ment’s ev­i­dent need for fund­ing for strate­gic op­er­a­tions such as Eskom, the power util­ity.

Eskom, which is fac­ing ma­jor pow­er­gen­er­a­tion prob­lems, has f und­ing short­falls that run into bil­lions.

Po o r ma i n t e n a n c e , d e l a y e d con­struc­tion of power sta­tions and out­dated in­fra­struc­ture con­tinue to dog the power util­ity. On 2 Novem­ber, a silo at a power sta­tion in Mpumalanga col­lapsed, send­ing parts of the coun­try into dark­ness.

The coun­try-wide power out­ages may have added to the spec­u­la­tion. The last time South Africa faced such a power cri­sis was in 2008.

How­ever, the sell-off sends a clear mes­sage – in­vestors do change their minds.

A few weeks ago t he Na­tional Trea­sury an­nounced dur­ing its minibud­get that it may look at sell­ing non­core state-owned as­sets. The mar­ket re­ac­tion was i mme­di­ate – Telkom shares gained more than 5%.

This was a sig­nal that the mar­ket was in favour of the gov­ern­ment’s move to sell off its in­ter­est in the f ixed-line tele­phone op­er­a­tor.

The s a me c a n not b e s a i d of Vodacom. The gov­ern­ment holds a 13.9% stake in Vodacom, which is worth more than R27bn.

Vodacom, SA’s l a r gest mo­bile phone op­er­a­tor by sub­scribers, is 65% owned by Bri­tish mo­bile phone gi­ant Voda­fone, with 17% held by the South African gov­ern­ment and the Pub­lic In­vest­ment Cor­po­ra­tion.

“If the South African gov­ern­ment is con­tem­plat­ing to part ways with it s st r ate­gic sta ke i n Vodacom… some­where there is a big trade-off that the big­gest share­holder the depart­ment of telecom­mu­ni­ca­tions and postal ser­vices is busy with or has con­cluded,” says a tele­coms an­a­lyst on con­di­tion of anonymity.

Vodacom has been declar­ing a con­sis­tent div­i­dend for its share­hold­ers, in­clud­ing the South A frican gov­ern­ment.

“Sell­ing a Vodacom stake with­out a trade-off would be tan­ta­mount to say­ing no to a con­sis­tent i ncome,” warns the an­a­lyst.

He also warns that such a move would see the gov­ern­ment re­lin­quish its abil­ity to gain in­tel­li­gence in the ICT in­dus­try.

The an­a­lyst sug­gested that per­haps clues for pos­si­ble gov­ern­ment moves in that re­gard could be found in a R7bn deal i ni­ti­ated by Vodacom to buy Neo­tel, SA’s sec­ond-big­gest f ixed-line tele­phone group.

Neo­tel is owned by In­dia’s Tata Com­mu­ni­ca­tions. Com­mu­niTel and Nexus Con­nec­tion are mi­nor­ity share­hold­ers in Neo­tel.

“It may be t hat t he gover nment might be plan­ning to force a f ull merger bet ween Neo­tel and Vodacom once t he deal is given a nod by a l l reg­u­la­tor y au­thor­i­ties.

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