Weekend reports that UK cellular company Vodafone is set to takeover South African fixed-line operator Telkom appear to be unfounded.
The deputy president`s office has confirmed that a breakfast meeting involving senior representatives from the Department of Trade and Industry (DTI), the Independent Communications Authority of SA (ICASA), the South African Broadcasting Authority (SABC) and Vodafone head Arun Sarin took place on Friday morning.
However, spokesperson Thabang Chiloane says the meeting had "nothing to do with Telkom". Instead, the group listened to a presentation on convergence in ICT.
Telkom, meanwhile, admitted meeting with Vodafone, saying the companies had discussed issues of co-operation. CEO Papi Molotsane said: "The objective of the meeting was to explore possibilities of maximising our joint investment in Vodacom." The statement, released today, added that a sale would have to be sanctioned by the board.
Business Times on Sunday reported that Vodafone was seeking to buy out Telkom, which is valued at about R72 billion. However, on Monday morning, press reports quoted Vodafone as saying it was not in discussions with Telkom about buying SA`s only fixed-line operator.
Doesn`t make sense
Analysts are questioning why such high-powered entities, like the DTI, ICASA, the SABC, Dimension Data and the Public Investment Corporation would all be present at a meeting if not to discuss Telkom`s sale. Those analysts ITWeb spoke to, however, were in agreement that it does not make sense for the South African government to divest in Telkom.
Telecoms analyst at BMI-TechKnowledge Richard Hurst says a R72 billion cash injection into the local telecommunications industry, compared to SA`s trade deficit of about R24 billion (for the first five months of 2006), would be welcome. However, he does not see the government divesting itself of its stake in Telkom, nor does he believe it makes sense for Telkom to lose the profitable Vodacom as an alternative scenario.
Furthermore, Telkom`s expansion strategy is at odds with Vodacom`s allowable mandate, Hurst points out. Vodacom`s shareholder agreement prohibits it from expanding into North Africa and the Middle East, two areas where rival MTN is active. If the UK firm takes over Telkom, it would have to be comfortable with its expansion plan.
Telkom has an interest in developing markets in Kenya and Nigeria, and is specifically focused on entering the sub-Saharan markets. "Nigeria is a market that you cannot ignore," Molotsane has said, and indicated the utility has its "ears on the ground" in Africa.
However, should Vodafone decide to spend more in SA, especially in the fixed-line arena, Telkom would be an optimal purchase for the company. Not only has the second national operator not come on line yet, but Telkom has an established track record with customers already being sewed up in medium-term contracts of around two years, Hurst says.
Another analyst, who asked not to be named, said it would not make sense for Vodafone to buy out Telkom. First, it is 38.5%-owned by the government, and second, it is a strategic asset. As such, the government is not likely to allow the only fixed-line operator to be owned by a foreign company.
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