Govt will not sell its Telkom stake, says minister

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 26 Jul 2023
From left: Telkom group CEO Serame Taukobong, Telkom group chairman Geoffrey Qhena and communications minister Mondli Gungubele.
From left: Telkom group CEO Serame Taukobong, Telkom group chairman Geoffrey Qhena and communications minister Mondli Gungubele.

Government is adamant it will not sell its Telkom stake, as the telephony group remains key to its national strategy to provide quality connectivity to South Africans.

This is according to communications and digital technologies minister Mondli Gungubele, speaking yesterday at a media briefing in Centurion.

During the roundtable discussion held with Telkom executives, Gungubele reiterated government’s stance of holding on to its Telkom shares, as the potential takeover of Telkom has sparked industry-wide interest over the past year.

Telkom is majority state-owned – government owns 40.51% in its own name, and the Public Investment Corporation, the asset management company for the Government Employee Pension Fund, owns 13.6%. This effectively means government owns a stake of 54.11%.

According to the minister, the loss-making telephony group remains of paramount importance to government’s plans to drive SA beyond the fourth industrial revolution and unlock economic growth.

“The relationship we have with Telkom, as the shareholder and also in other ways, is quite a well-endowed relationship, which has the potential to turn the country's fortunes around. That's why when I was asked the question, ‘are you prepared to sell your Telkom shares’, I said no because we cannot do away with such a leverage.

“As we sit now, we are confronted by this huge challenge of unlocking economic value that lies in the internet and we are working very hard to ensure the entire country is connected. Through this relationship [with Telkom] we could move efficiently, at scale, and at highest speed,” explained Gungubele.

Government previously contemplated selling its stake in Telkom to raise funds to bailout South African Airways. However, it has since decided to stand firm.

The minister noted the Department of Communications and Digital Technologies is committed to realising the president’s vision of bridging the digital divide, by providing affordable high-speed internet access to all South Africans, through various planned initiatives.

Responding to a question about government’s target and timeframe to connect SA’s population, the minister stated: “By 2024, we are looking to connect 1.74 million homes, and in three years, we want to ensure 80% of South Africa is connected.”

He stated that over the next few weeks, the department will make an announcement on a multi-stakeholder partnership that will play a key role in the implementation of this target, noting that Telkom lies at the centre of this collaboration.

According to data from Statista, there has been more than 10% growth in the number of internet users in SA from the pre-pandemic period, with 43.48 million active internet users in SA, as of January 2023.

During his 2023/2024 budget vote in May, Gungubele announced the State IT Agency will be tasked with rolling out a national broadband project worth at least R6 billion.

Government also plans to deploy close to 10 000 WiFi hotspots to boost connectivity across the country, he said at the time.

Communications minister Mondli Gungubele, during a walkabout around Telkom Park in Centurion.
Communications minister Mondli Gungubele, during a walkabout around Telkom Park in Centurion.

In its latest financial results, Telkom posted flat revenue, with earnings up less than 1%, and revealed it planned an asset write-down of R13 billion, through the planned impairment of its businesses Openserve, Telkom Consumer, Gyro and BCX.

According to the company, significant market changes, challenging economic conditions and load-shedding, among other difficulties, have had an adverse effect on the group’s performance.

This has seen growing interest in Telkom and industry competition to buy a stake in SA’s third-biggest mobile operator,because of its extensive infrastructure, data centres and customer base.

Earlier this month, Telkom rejected a bid for a controlling stake in the company by a consortium led by its former group CEO Sipho Maseko.

Last year, MTN, Africa’s biggest mobile operator, also made moves to buy Telkom. However, MTN walked away from the deal after the telephony group failed to provide it with assurances around exclusivity.

In January, Telkom and Rain terminated discussions relating to Rain’s proposal to merge with the majority state-owned telephony group.

Responding to a question on the criteria of an ideal shareholder, Telkom Group chairman Geoffrey Qhena commented that the telco would be willing to consider a partner who shares government’s interest in harvesting Telkom’s infrastructure to connect the country, among other qualities.

“We accept that there has been under-performance [of Telkom] particularly this year, but that has been largely driven by the impairment and we do not see that repeating,” noted Qhena.

“When we look at the offers we receive, if we feel, as a board, that this will not be to the benefit of our shareholders, then we will not accept it.We know what the value of Telkom is and there is a lot of potential in the role Telkom can play in ensuring South Africans benefits from thisrelationship we have with government.”