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South Africa likely to sell shares in Telkom, Vodacom to back utility Eskom - market talk [IntelliNews - Weekly Reports](IntelliNews - Weekly Reports Via Acquire Media NewsEdge) South Africa's government is likely to sell part of its 39.8% stake in former fixed-line monopoly Telkom and/or part of its around 14% shareholding in the country's biggest mobile operator Vodacom, controlled by UK Vodafone, in a bid to close a funding gap at national power utility Eskom, according to analysts, quoted by Bloomberg. The country's dominant power producer has a ZAR 225bn (USD 20.6bn) shortfall in funding over five years through March 2018. On Sunday (Sept 14), the National Treasury announced a package of measures aimed to support Eskom in order to maintain the country's energy security and underpin economic growth. One of those measures was an equity injection that "will be funded from leveraging non-strategic government assets". The Treasury said that further details will be provided by the finance minister as part of budget announcements. According to analysts and stock market players, Telkom and Vodacom are among the most likely assets to be sold, as the companies are listed and a share sale is relatively easy. Moreover, the ruling African National Congress (ANC) has previously considered a sale of its Telkom stake. The market speculation has led to a 9.5% drop in Telkom's share price in two days. The JSE-listed company closed at ZAR 55.5 on Tuesday (Sept 16), down from ZAR 61.30 on Friday (Sept 12 - before the Treasury's announcement) amid heavy selling. Vodacom's share price closed at ZAR 129.73 on Tuesday, up 0.6% from Friday's close. In 2012, the government rejected a ZAR 3.3bn bid by South Korea's largest telecoms group Korea Telecom Corporation (KT Corp) for a 20% stake in Telkom, saying the firm was a strategic asset in its plan to roll out broadband internet to all South Africans by 2030. The move then disappointed investors, who had hoped that the Korean partner would help Telkom upgrade its network and support its further development. Telkom is now in the midst of an implementation of a massive turnaround strategy. Under it, the company has agreed to transfer the management of its mobile network infrastructure to MTN and has sold its loss-making internet service business iWayAfrica. It has also bid to buy out local information and communication technology group Business Connexion (BCX) for ZAR 2.7bn. While the MTN and BCX deals are awaiting regulatory approvals, the turnaround plan stumbled in July, when Telkom suspended its restructuring and retrenchment process following pressure from labour unions. It had not disclosed exactly how many jobs it would cut, but had only said that it plans to reduce its 2,650 management staff in a bid to reduce the number of management layers and lower the employee cost-to-revenue ratio to 25% over the next 5 years from 30%. In May, Telkom's CEO Sipho Maseko said the company intends to cut ZAR 1bn in costs each year within the next five years in a bid to restructure its business and make it more profitable, adding that the initiative will affect all aspects of the business, including job cuts. The company had previously failed to push through forced retrenchments due to fierce opposition from labour unions. In addition to the government, the Public Investment Corporation (PIC), a wholly state-owned investment management company, owns a 12% stake in Telkom. (c) 2014 Emerging Markets Direct Media Holdings LLC Provided by SyndiGate Media Inc. (Syndigate.info). |