JSE-listed Telkom does not require foreign investment to implement its turnaround strategy, but rather requires skills and competency, says communications minister Dina Pule.
Pule was responding to a question from Congress of the People Member of Parliament Julie Kilian on the expected impact of Cabinet's decision not to allow the telecoms company to sell 20% of its stake to KT Corporation for about R3.3 billion.
The minister said, in a written response, when pondering the proposed deal, “Cabinet took into account the fact that the Department of Communications is driving the government policy of rolling out broadband, in partnership with the private sector, to all citizens by 2020.
“Broadband is one of the key infrastructure programmes that can enable and foster faster and inclusive economic growth.”
Pule said, as a result, it was “even more important that Telkom finds the best and most suitable solution to its current challenges” as it is a key component of the state's efforts to improve citizens' skills.
On 1 June, news emerged that Cabinet would not support KT's proposed acquisition of 20% of Telkom for a lower price of R25.60 for every new share. The parties discussed a share price of R36.06 last October.
“The government recognises the need for Telkom to implement an urgent turnaround strategy, and to get the company back to the critical centre of delivering ICT services to all South Africans.”
Not enough
Telkom faces dwindling fixed-line penetration and falling voice revenue. In the year to March, it reported headline earnings down a third, to R1.658 billion, but its after-tax profit on continuing operations was 93% lower, at R179 million. It slumped to a R90 million net loss, after taking into account discontinued investments, which lost R269 million.
Democratic Alliance shadow minister of communications Marian Shinn questions where Telkom will get the necessary funding, and whether it will become yet another state entity that requires frequent bailouts.
Shinn says KT would have provided Telkom will access to skills, and points out that the company cannot afford to poach the necessary talent from other operators. She says Pule's answer does not speak to whether the deal would have made good business sense.
The department has yet to respond to questions, sent over a month ago, as to why government was not in favour of the deal, which options are being considered and whether Telkom needs a strategic partner.
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