The 4 March shareholding expiry will not mark the end of government's influence over Telkom, as communications minister Roy Padayachie has confirmed that talks are under way to entrench certain special rights into government's shareholding in the fixed-line incumbent.
Government currently holds a Class A shareholding status for its 39.8% shareholding in Telkom. Its Class A shareholding status gives it special privileges over other shareholders, including, among others, the right to appoint five out of 12 directors to the board. These include the chairman of the board.
However, the special shareholding is set to expire this week, on 4 March, and with it the special rights government currently enjoys.
Speaking at a media briefing in Johannesburg on Friday, Padayachie explained that government has accepted that the “golden share” will expire on 4 March.
“We are not going to do anything to try to entrench all the rights that the golden share actually allows. But there are certain specific rights that we are keen to try and entrench,” he stated.
Padayachie would not divulge which of the special rights government is seeking to entrench.
He noted, however, that talks are already under way with the Johannesburg Stock Exchange (JSE) and the Telkom board regarding the new articles of association that will have to be defined post expiration of the golden share.
“It is our understanding that, as of 4 March, the existing entrenched rights will fall away and the articles of association remain on board, less the rights of the golden share.”
Therefore, according to Padayachie, there is no crisis in terms of the legal statutes to have concluded its discussions with the JSE and the Telkom board before the expiration date.
Instead, Padayachie explained that the Telkom board is likely to first asses the impact of the New Companies Act due to come into effect on 1 April, before defining new articles of association.
No surprise
Ovum industry analyst Richard Hurst says government's latest move was to be expected.
He points out that Telkom has been subjected to continuing leadership issues and a lack of strategy, noting that government has been guilty of forcing these changes to fit a political agenda.
Absa Investment analyst Chris Gilmour, however, concedes that it's not unreasonable for government to seek a compromise with the JSE and the Telkom board to consider retaining certain special rights, as it is the majority shareholder in Telkom.
Gilmour notes, however, that the entire situation places the JSE in a difficult position as the concepts of special shareholding status fell away a long time ago.
He points out that if it weren't such an expensive exercise, government should completely delist Telkom and re-establish it as a public enterprise.
Critical dilemma
However, this is not on the cards for Telkom, as Padayachie steadfastly argued that the Department of Communications (DOC) does not view Telkom as a state-owned entity, but rather as a listed company on the JSE, in which government has a majority shareholding.
He conceded that the DOC is faced with the critical dilemma of how to develop an approach to Telkom in terms of building a company that must bring a profitable return to its shareholders, but - at the same time - is an important instrument for the state.
Padayachie said government is not satisfied with the current state of accessibility to telecoms services in the country.
“Telkom is the only instrument that we have, as a government, to ensure that our developmental and strategic outcomes with respect to those universal services can in fact be met. Telkom has amazing potential to meeting the state's broadband goals,” he explained.
The DOC will encourage Telkom to be profitable and accountable to all of its shareholders. “It is not only accountable to government's priorities,” he added.
He noted that going forward, Telkom would be managed to balance both its commercial imperatives with the developmental objectives of the state.
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