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Po o r ma i n t e n a n c e , d e l a y e d construction of power stations and outdated infrastructure continue to dog the power utility.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.