Telkom and MTN shares received a hammering on the JSE this morning following government`s announcements on liberalising the telecommunications market.
By 11am, Telkom`s share price had fallen by more than 5%, or 400c, to R73.50, although it was off its intraday low of R72.70. MTN`s share price had recovered to R30.30, a loss of 15c, after having fallen to R29.50.
The telecommunications index tumbled 2.24%, or 15 points, to 655, while the all share index edged 36 points to 11 189.
Trade in telecommunications shares was heavy after a number of stockbroking firms issued advisory notes this morning expressing concern about Telkom`s continued dominance of the telecommunications market.
More than 3 million Telkom shares and a further 2.9 million MTN shares changed hands in the first three hours of JSE trade. In terms of value, the two companies` shares represented 30% of the total amount traded on the JSE.
David Shapiro, a director with stockbroker Barnard Jacobs Mellet, says the trade was expected on Telkom, but he was surprised at MTN`s movements.
"I think many investors see the prospect of lower cost calls hitting the mobile operators as well. But certainly it will hit Telkom most of all," he says.
Telkom`s CEO, Sizwe Nxasana, told Reuters yesterday that deregulation would hit the group`s business.
"What the minister is announcing now as we speak, may have major implications on our business as a whole and on competition in the country as a whole," Nxasana said.
Shapiro says Telkom shares had been particularly popular with foreign investors, (Telkom has a secondary New York listing) and he is worried they may start to sell them later in the day.
"Foreign investors tend to exaggerate a move on the share price and once New York starts trading we may see a lot more damage to the Telkom share price," he says.
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