The group of investors led by former CEO of Telkom Sipho Maseko has amassed a war chest of about R12bn to buy a substantial stake and inject much-needed cash into the ailing telecoms operator.
Business Day understands from a source with direct knowledge of the plan that Maseko has garnered support from major shareholders for a deal that will see the consortium take up a 35% stake in Telkom.
This is after Maseko sold a vision that includes unlocking value by combining Telkom’s physical telecoms assets — fibre and cellphone towers — with those of Mauritius-based Axian Telecom to create a pan-African infrastructure company.
The consortium has raised about R12bn to finance the deal and pump money into Telkom, which launched a frenzied scramble for cash earlier this year, including plans to slash up to 15% of the workforce. The bulk of the money will come from Axian, which has pledged $500m (about R9bn), while the rest will come from lenders.
Under the deal, the government will sell 14% of its stake to the Maseko consortium, and the rest will come from institutional investors that exclude the Public Investment Corporation (PIC).
The PIC, which is unwilling to sell because it wants to participate in the upside, then forms another part of the consortium, bringing about 16% to the table, which gets the investor group over the 50% mark.
The prospects of Telkom breaking into the upper echelon of the lucrative industry sent the shares as high as R95 three years ago, prompting Maseko to proclaim in 2020 that an internal valuation exercise showed the company’s true value was not reflected in the share price.
Maseko, who was at the helm of the company for nearly a decade, is now looking for a way to complete that value unlock. If the plan is successful, it would bring to an end a period of intense deal and acquisition interest for Telkom.
Mobile operator
MTN had expressed interest in acquiring Telkom in July last year, a move that would have propelled it to the status of SA’s largest mobile operator, replacing Vodacom.
Soon after, Rain tabled a formal, nonbinding proposal to merge with Telkom. Investment firm Toto Consortium also reportedly made an offer valued at R7bn for a stake in Telkom.
This newspaper also has it on good authority that the deal between MTN and Telkom collapsed after the government indicated it would not support the deal. An MTN-Telkom tie-up would have faced significant regulatory and competition
hurdles as well.
Business Day has also learnt that Rain was initially part of Maseko’s consortium until the company decided to go it alone.
Axian operates in eight markets through subsidiaries in Tanzania, Madagascar, Togo, Mauritius and Uganda, and nonconsolidated joint ventures in Senegal, Réunion and Comoros.
According to the group’s latest results, it had 31-million revenue-generating subscribers at the end of the first quarter and owned 3,343 towers.
About 34% of Axian revenue comes from Madagascar, 35% from Tanzania, 22% from Togo and 8% from Mauritius.
Telkom has so far not commented, saying it is in a closed period and will update the market on June 13 on its strategy to unlock value.
All this comes amid an astonishing turnaround of fortunes for the telecoms group as Telkom recently flagged it could swing into annual loss, weighed down by hefty writedown charges worth R13bn that sent its share price tumbling earlier in May.
Telkom warned investors in a trading update headline earnings per share could drop 85%, at best, or swing into a loss.
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