Telkom’s CEO says none of the approaches over the past year by four parties seeking a stake or ownership of the fixed-line operator warrant progress or full consideration.
“It’s like a process of lobola,” group CEO Serame Taukobong said at the group’s annual results presentation on Tuesday when asked about its apparent reluctance to consider offers.
“When you go to a lobola, you send people upfront with a letter to show intent. You also leave something with the family to show that you can take care of their daughter. So until somebody comes to our chair with a strong letter and also proof that they can deliver on their proposition, then all approaches will not be considered.”
At the end of May, Business Day reported that a consortium led by former Telkom CEO Sipho Maseko had amassed a war chest of about R12bn for a bid to take up equity in the fixed-line operator. Mauritius-based Axian Telecom, a partner in the bid, is expected to put up $500m (more than R9bn) of this, and Maseko’s investment firm, Afrifund, the remainder.
But even with letters from banks backing the consortium, Telkom management appears unconvinced after raising doubts on Monday about the investment consortium’s ability to execute and fund the proposal that would see Telkom’s fibre, cellphone towers and data centre assets combined with those of Axian to create a pan-African telecom infrastructure group.
Separately, Taukobong told Business Day: “As the board is applying itself, it is saying: we need a certain level of certainty for the deal to be considered and executed. The board is not at a level of comfort in certainty provided by the consortium.”
While the former MTN Ghana CEO has expressed these doubts, Axian is confident in its ability to execute, having made a number of acquisitions including the takeover of former state-run operators in Tanzania and Togo, and the necessary firepower.
“We are confident in our financing arrangements for a valuation of Telkom which we believe would be fair and acceptable to shareholders,” a spokesperson for the consortium said when approached for comment.
“The proposed transaction would be financed through a combination of existing cash resources and third-party funders. Our funders have provided Telkom with letters confirming their in-principle support as is usual for a proposed transaction of this nature,” the spokesperson added.
“The final price, together with the necessary cash confirmation and funding requirement, would be subject to due diligence after Telkom’s results have been published, and following negotiations with the board as is standard practice and required by law. We are engaging with Telkom’s board to provide them with the appropriate level of comfort about these arrangements.”
MTN expressed interest in taking over Telkom in July 2022 , a move that would have propelled it to the status of SA’s largest mobile operator ahead of Vodacom.
That deal is estimated to have been worth R30bn, almost twice the current market valuation of the state-controlled company.
Mobile operator Rain tabled a formal, non-binding proposal to merge with Telkom shortly thereafter, while investment firm Toto Consortium also reportedly made an offer, valued at R7bn, for a stake in Telkom.
But all three offers had been withdrawn by January after unsuccessful talks, and MTN has quelled speculation that the two parties may be warming to each other again.
“There is no offer or official discussions at the moment,” said Nompilo Morafo, MTN’s chief sustainability & corporate affairs officer.
“Telkom is a business with good assets. MTN remains of the view that the offer made in July 2022 would have been good for shareholders of both companies and broader stakeholders.”
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