Govt rules out Telkom stake sale

Barcelona - South Africa ruled out a sale of its stake in phone company Telkom [JSE:TKG] as part of a plan to raise funds for electricity needed to spur economic growth, Telecommunications Minister Siyabonga Cwele said

“We’re not selecting Telkom because we want it to give internet; we want connectivity,” Cwele said in an interview at the Mobile World Congress in Barcelona on Monday.

“It is strategic. We’re not going to sell Telkom.”

South African Finance Minister Nhlanhla Nene said in September the government would sell assets to give utility Eskom R20bn in support and increase bond guarantees. The electricity provider faces a R225bn funding shortfall until March 2018 as it builds plants to meet demand and end rolling blackouts.

While Nene didn’t specify which assets would be sold, Telkom has been discussed by analysts including Owen Nkomo, head of Inkunzi Investments, as a potential target.

Telkom shares fell by over 1% in trade to hit R83.80. in Johannesburg. Rival Vodacom Group, which is controlled by Vodafone Group, traded 0.4% lower at R135.57 after falling as much as 1.4%.

The government owns a stake of almost 40% in Telkom, valued at about $1.5bn. The state favours a sale of its 13.9% stake in Vodacom, people familiar with the matter said last month. While the stake is valuable to the country, it’s not a long-term investment, according to Cwele.

Not key

“I wouldn’t say that long term we’ll need it in the future but it is a useful investment to us,” he said in the interview. “It brings a lot of revenue into government, but it’s not so key in terms of delivering the services to people.”

Telkom, Africa’s largest fixed-line operator, will lead the expansion of broadband Internet access to every household by the end of this decade, according to South Africa’s National Infrastructure Plan.

“Telkom is aware of the strategic role that it can play in South Africa,” spokeswoman Jacqui O’Sullivan said in an e-mail. “Telkom will drive collaboration between government and industry to create a truly connected, digital nation.”

Eskom intends to invest R138bn in the three years through March 2018, according to the National Treasury. The government will give the utility R20bn this year and another R3bn in 2016, to be funded through selling state assets.

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