Government shelves plans to sell Telkom stake

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Telecoms and postal services minister Siyabonga Cwele. (Photo source: WEF)
Telecoms and postal services minister Siyabonga Cwele. (Photo source: WEF)

Government's plans to sell a portion of its 39% stake in Telkom are no longer an option, according to telecommunication and postal services minister Siyabonga Cwele.

Cwele confirmed this news in a statement following yesterday's release of Telkom's interim results for the six months ended 30 September, which showed a 53.8% increase in mobile service revenue, pushing group revenue to R20 847 million.

"Government [is] no longer considering the possibility of selling its shares in Telkom," says the telecoms minister in the statement.

His pronouncement echoes sentiments shared by Telkom CEO Sipho Maseko in May, stating he does not believe the JSE-listed telecoms operator is high up on government's "chopping block" of assets to sell.

News of government's intention to dispose of its Telkom shares was revealed by the telecoms group last August, following widespread speculation that the sale would be used to raise funds to bailout struggling South African Airways (SAA).

The potential sale, which pundits called nonsensical, was a hard pill for most to swallow because money from a strong government asset was going to be poured into another cash-strapped state-owned enterprise.

In 2015, government sold its almost 14% stake in Vodacom to the Public Investment Corporation for around R28 billion to raise funds for power utility Eskom, which needed a R23 billion bailout.

In his October 2017 Medium-Term Budget Policy Statement (MTBPS), former finance minister Malusi Gigaba also confirmed government's intention to sell.

Gigaba said in a statement at the time: "The expenditure ceiling is threatened in the current year, as a result of government's recapitalisation of SAA and the South African Post Office. Government is disposing of a portion of its Telkom shares to avoid a breach, with an option to buy them back at a later stage."

Cwele backed up Gigaba, saying government decided to sell the Telkom shares instead of borrowing to fill the hole in order to maintain fiscal discipline.

Following the MTBPS, Cwele said government was going to establish a task team to engage Telkom on the sale of its shares.

Yesterday, however, he finally confirmed government's about-turn, lauding Telkom's improved financial results.

In a statement, the ministry says: "The minister of telecommunications and postal services Dr Siyabonga Cwele welcomes Telkom's half-year financial results for the period that ended in September 2018.

"Government will once again be getting a dividend from Telkom despite the tough economic environment. Telkom has declared a dividend of 112c per share."

The minister also acknowledged Telkom's board leadership and management of the executive team for the results. "The department is supporting Telkom's BEE facilitation application."

Second time not a charm

This is not the first time the administration has dabbled with the idea of disposal of its Telkom stake.

In 2012, Telkom and Korea-based KT Corporation announced they had, in principle, agreed on a per-share price for KT's purchase of a 20% stake in the telecoms operator.

However, government pulled the plug on a proposed strategic transaction between KT and Telkom. At the time, Cabinet said it had taken the decision not to support the transaction "as proposed".

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