Telkom South Africa has recently confirmed receiving a non-binding indicative letter from a consortium seeking a majority stake in the company. The consortium reportedly consists of Axian Telecom and the Government Employees Pension Fund, managed by the Public Investment Corporation. Interestingly, the group is led by Telkom’s former CEO, Sipho Maseko.
At this point, discussions surrounding the bid are still in the exploratory stage. The Telkom board of directors is currently evaluating its options and has requested the consortium to provide additional clarity on matters such as the proposed offer price and the certainty of funding.
This bid comes at a challenging time for Telkom, as the company announced this week that its full-year earnings have dropped by an alarming 76.6% year-on-year. Telkom attributes this decline to various macroeconomic factors, primarily soaring inflation and the ongoing national energy crisis in South Africa.
The country is currently experiencing some of its worst-ever power cuts due to an overwhelmed national power grid, resulting in blackouts lasting up to 16 hours. Amid this crisis, telecom operators in South Africa have been struggling to keep their networks operational, often at great expense. Telkom has emphasized the “unparalleled levels of loadshedding” it faced over the past year while also highlighting the surge in theft and vandalism directed at network infrastructure.
This takeover offer, however, is not solely driven by the company’s struggling financial performance. In fact, Telkom has been considering mergers and collaborations with both local and international players for more than a year. The company has participated in negotiations with Rain and MTN in the past year alone.
More recently, pan-African operator group Axian showed significant interest and submitted a joint bid with Afrifund Investments earlier this year. However, this bid was rejected for being too low, hence the new approach this week.
The potential takeover of Telkom South Africa is an important development in the telecommunications landscape of the region. As discussions between Telkom and the consortium are still in the early stages, it remains to be seen how the situation will unfold. Nonetheless, the involvement of former CEO Sipho Maseko in the consortium demonstrates perseverance towards Telkom’s growth and improvement.
