The Telkom Group may have alternative options to the Business Connexion (BCX) acquisition in the wings. However, analysts believe the company's first move is likely to be on the mobile front.
The telecoms giant has for sometime said its move into the IT services space would be critical to its long-term success.
Last month, Telkom acting CEO Reuben September said the company had second and third options waiting in the wings should its BCX acquisition be turned down.
"These alternates will be implemented almost immediately after the ruling. The addition of an IT competence is a critical aspect of our geographical growth initiatives," he said.
Mobile 'urgent'
However, investor analysts believe Telkom may focus on the more "urgent" requirements of reviewing its mobile strategy.
Fuelling speculation that Telkom's stake in Vodacom might be up for grabs, September last month told analysts the company was reviewing its mobile strategy and would come to the market as soon as it had made a decision.
September would not be drawn on the details of the review.
One analyst, who prefers to remain anonymous, says this review is obviously still top of mind for the group.
"If you look at the statement sent out to shareholders on Friday, Telkom said it will continue to explore opportunities in areas such as fixed-mobile and other converged services. Leading the future-looking statement with 'fixed-mobile' says to me they are probably going to decide what to do with the stake in Vodacom first and then look at IT-related investments," he says.
IT acquisitions forbidden
Another analyst, who asked not to be named, agrees with this assessment, saying things seem to be coming to a head between Vodacom and Telkom.
"I think it's more of an imperative for Telkom management to make a decision about its mobile strategy. Vodacom is a great contributor to Telkom's earnings and is far more important in the scheme of the business than an IT acquisition."
He adds: "Also, we haven't heard from the Competition Tribunal what its reasons were for turning down the BCX acquisition. It could preclude Telkom from making future acquisitive moves in the IT arena."
In May, Telkom Media CEO Mandla Ngcobo said Telkom would have no choice but to look for international IT acquisition prospects if the BCX deal were turned down.
The statement followed Telkom's executive of the Business Integration Service Hendrik Matthyser's testimony before the Competition Tribunal that the group would endeavour to grow organically.
Securing an international acquisition may help Telkom to grow outside of SA's borders. However, the analyst warns that if the telco is precluded from making an acquisition with local interests, it will have to focus on driving organic growth.
Quit fiddling
A third unnamed analyst says the investor community would be far happier if Telkom focused on building its internal capacity and offerings.
"We certainly would prefer it if Telkom concentrated on organic growth. They really don't need to be messing around with small acquisitions like this; there are bigger issues at play. Besides, I very much doubt any company would welcome Telkom's overtures given the negative impact this deal has had on BCX," he explains.
Following Thursday's announcement that the Competition Tribunal had turned down the BCX acquisition, Telkom's share price dipped to R177.02, but closed at R178.40 on Friday.
Analysts say investor sentiment will only be evident next Monday.
"Telkom is paying an R11 dividend on Monday to all those shareholders recorded in the company's register at the close of business on Friday. Until then, we will see very little sale activity on the company's shares," comments one analyst.
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