Has the state lost control of Telkom?

BELOW 50%: PIC’S STAKE INDICATES ‘GOLDEN SHARE’ DAYS ARE OVER

Government’s direct and indirect stake in Telkom seems to have dropped below 50% for the first time since it warehoused and then sold most of a stake to the Elephant Consortium and Wiphold in a 2005 black economic empowerment transaction.

Based on public disclosures by the Public Investment Corporation (PIC) on its proxy voting record, its shareholding in the telecommunications operator (on behalf of the Government Employees’ Pension Fund) dropped to 7.7185% as at the date of Telkom’s most recent AGM, August 2016. Previously, it had been above the 10.5% mark for the past decade meaning that, when pooled with government’s direct stake, they would account for more than 50% of votes.

The 39.76% stake directly held by the department of Telecommunications and Postal Services (DTPS) on behalf of the government has not changed materially since Telkom’s IPO on the JSE and NYSE in 2003.

Holding more than 50% of the votes had never been an issue until 2011, when government’s golden share (via a Class A shareholding) entitled it to “a reservation of certain rights in the control of Telkom”.

According to the DTPS, this included the rights to “appoint [a] specific number of directors and an entitlement to veto certain decisions”. This expired upon the eighth anniversary of the group’s IPO.

The PIC’s holding, as disclosed by Telkom in its annual reports to the end of March for each year, shows how its interest in the operator has changed over time: 2007: 15.27% 2008: 15.23% (8.9% through wholly-owned subsidiary Black Ginger 33, the Class B shareholder, remainder as Class A)

2009: 15.62% (8.95% through wholly-owned subsidiary Black Ginger 33, the Class B shareholder, remainder as Class A)

2010: 12.9% (8.9% through wholly-owned subsidiary Black Ginger 33, the Class B shareholder, remainder as Class A) 2011: 10.89% 2012: 10.54% 2013: 11.66% 2014: 13.48% 2015: 12.01% 2016: 11.41% These data points (at fixed points in time) ought to be reconciled with the holdings as disclosed in the PIC's published proxy voting record: 16 September 2009: 17.556% 2010: Proxy voting record not available 2011: Proxy voting record not available 24 October 2012: Proxy voting record not available 27 September 2013: 11.5684% 27 August 2014: 12.991% 26 August 2015: 11.93% 24 August 2016: 7.7185% This means if the 7.7185% as disclosed is indeed correct, the PIC’s holding dropped below 10.25% (the threshold to ensure 50.01% of votes if pooled with government’s stake) between March 31, 2016 and August 24, 2016 (the date of Telkom’s AGM).

Telkom’s annual report will be published in July and if the PIC’s drop below 10% is permanent, this will be disclosed.

Questions sent to the PIC and Telkom remained unanswered.

Hilton Tarrant (hilton@moneyweb.co.za) works at immedia.

Picture: Bloomberg DESPERATELY SEEKING ANSWERS If the PIC’s stake in Telkom has fallen too low – as circumstantial evidence indicates – the state may have lost its right to dictate the composition of the board and to veto votes at meetings. But both Telkom and the PIC...