The government will hang on to its 40% stake in Telkom as leverage in its pursuit of high-speed internet infrastructure for rural areas. It plans to connect 80% of the population in two years.
In the past year, Telkom has been at the centre of takeover bids by MTN, Rain and, most recently, a consortium led by its former CEO, Sipho Maseko. All have been rejected.
After visiting Telkom’s Openserve operations in Pretoria on Tuesday, minister of communications and digital technologies Mondli Gungubele reiterated that the government will not sell its stake in the company or reduce its shareholding.
“Telkom has huge potential to turn the country’s fortunes around ... We cannot do away with such leverage,” he said.
“We are confronted with developmental challenges to unlock our economy and the key is connectivity. We are working hard to make sure the entire country is connected and the main partner that will help us to move faster is Telkom.
“Based on the strategic objective of the government, it makes no sense to sell our shares ... it's not on our radar screen.
“We are happy with the shares we have and are leveraging that. We are not in a position to tweak. Shall we never tweak ... we don't know.”
Government “cannot do away with [its 40% stake] during this most challenging time. Our country needs high-speed internet at scale. [The relationship between Telkom and the government] must work for the sake of the poor and inequality.”
We have seen … how we can leverage one another to deliver (connectivity) at a bigger scale. We agree that the partnership will work, reduce costs and benefit people.
— Mondli Gungubele, minister of communications and digital technologies
The government believes in Telkom’s turnaround interventions and the plans it has, said Gungubele.
He added that the government is finalising a partnership between Telkom and 100% state-owned telecoms infrastructure business Broadband Infraco for the roll out to rural areas, adding that the talks are “highly advanced”.
“We have seen ... how we can leverage one another to deliver (connectivity) at a bigger scale. We agree that the partnership will work, reduce costs and benefit people.”
Telkom chairperson Geoffrey Qhena said the company can play a role in ensuring South Africa benefits from the asset. The partnership with the government will further enhance Telkom’s strong position in the infrastructure space, he added.
Telkom has more than 170,000km of fibre, with one-million homes passed, and potential to connect two-million. Its fibre falls under Openserve, which is coveted by competitors because its extensive infrastructure is integral to the rollout of 5G and increased demand for data.
Commenting on the unsuccessful takeover bids, Qhena, who joined Telkom four months ago, said he didn't join the company for “a fire sale” and that the board knew Telkom's value and potential.
“If we feel (an offer) is not benefiting shareholders, we won’t do it. When the share price is low, people want to take advantage. We want to [enhance value for all].”
Some Telkom subsidiaries will benefit from investment, said Qhena, adding that the company intends finalising the sale of its tower business in the coming months. It may also sell a significant portion of technology group BCX.
“The board is preoccupied with turning the tide and it gives me comfort [that] one of our major shareholders still believes in us.”
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