Telkom jumps over 7% on reports of PIC-backed bid

Shares in SA's third-biggest mobile operator Telkom rose 7% on Monday following reports that the Public Investment Corporation (PIC) is backing former CEO Sipho Maseko’s investment vehicle, in a bid for a large stake either in it or its assets.

Bloomberg reported on Saturday that there were talks that could potentially give a grouping including the PIC, Maseko’s investment vehicle Afrifund, as well as Mauritius-based Axian Telecom, about a 50% stake in the mobile operator.

The government owns 40.5% of Telkom, while the PIC - which manages over R2.5 trillion in assets - owned 15.13% of Telkom as of its 2022 year.

There is also a possibility that the group would try to buy Telkom’s fiber and tower units and combine them with Axian’s assets to create an African-focused infrastructure company, the unnamed sources said.

Valued at almost R14 billion on the JSE, Telkom's shares gained over 7% on Monday, but they have fallen about a fifth over the past one month and by over 40% in the past year.

Its depressed share price has added to speculation that major corporate activity is looming for the group, which is due to release results on 13 June.

Earlier in May, Telkom's shares had crashed by double digits after it warned investors that its shift to its new digital strategy, as well as plans to cut as much as 15% of its workforce, would prompt more than R1 billion in retrenchment-related costs and R13 billion in writedowns of various business units in its year to end-March.

READ | Telkom crashes back to pandemic-era lows as suitors continue to circle

Telkom has been struggling under the weight of a debt pile that stood at a net R16.3 billion at the end of September and in October MTN had walked away from takeover talks amid a citing a lack of exclusivity, while talks with data-only operator Rain were called off in January.

Makwe Masilela, who heads up Makwe Fund Managers, said on Monday that while the rumours could be driving the shares, it should be noted that Telkom is "very cheap at this level".

Masilela added that MTN still needed to tap into Telkom's 160 000km fibre network, while Telkom needed working capital. "MTN is bound to come back and reignite the talks," he said.

Peter Takaendesa, head of equities at Mergence Investment Managers, said the group's depressed share levels indicated it was not efficiently utilising valuable infrastructure assets to create operational cash returns for shareholders.

"Based on recent market transactions on other related fibre and tower assets, the value of Telkom's infrastructure assets is worth much more than Telkom's market value," he said.

"For investors that can navigate challenging stakeholder issues at Telkom and prioritise unlocking value from its assets, there is significant value on the table," said Takaendesa.