Saturday, June 05, 2010

South Africa - Govt pressing Telkom to increase stake of black investor stake

[business day] TELKOM is being pressed by the Department of Communications to sell more of a stake to black investors, to meet the state's empowerment requirements.

Consultants had been appointed to investigate measures the government could take as majority shareholder to strengthen Telkom's black economic empowerment (BEE) status, Mamodupi Mohlala, the department's director-general, told Business Day last week.

Telkom does not meet the government's requirement of a 30% BEE shareholding. A 7,2% stake is owned by the controversial BEE Elephant Consortium, through Newshelf 772, which bought the shares in 2005. The consortium planned to exit from Telkom as its lock-in period ended last month.

Ms Mohlala said Telkom had to improve its BEE credentials, including on hiring more black executives, on procurement, and on equity, which should be within the "confines of the DTI (Department of Trade and Industry) codes of good practice".

"Government has to lead with regards to transformation in the ICT (information and communication technology) space and come up with proactive strategies," she said.

Telkom is understood to have set aside shares to sell to broad- based BEE groups, but it is not yet clear when this will happen.

Elephant Consortium, whose shareholding has been shrouded in controversy, includes businessman Andile Ngcaba's Convergence Partners, businesswoman Gloria Serobe and Smuts Ngonyama, former head of the African National Congress's presidency.

The consortium would be wound up and its shareholders would own their shares in Telkom and Vodacom directly, a spokesman said yesterday.

When Telkom unbundled its 35% of Vodacom last year to its shareholders, Elephant got about 2% in Vodacom.

Brandon Doyle, the CEO of Convergence Partners, said the consortium would settle all its financial obligations with Telkom in the coming months. "After this, it will be distributing the remaining Telkom and Vodacom shares to its beneficiaries. The beneficiaries will make their own determination as to whether to continue to hold the shares ... the largest beneficiaries (including Convergence Partners) will continue to hold their shares." Convergence is the largest of several beneficiaries within the Lion Trust, which owns 50% of the Elephant Consortium.

Mr Doyle said it was difficult to comment on the settlement value as it depended on several factors, including the share price. Elephant Consortium's shareholding is understood to be worth billions of rand.

Ms Mohlala said if the Elephant Consortium sold its stake, the government would prefer that it did so to another BEE group rather than on the open market, to help Telkom maintain its status.

When asked whether or not the government would sell some of its approximately 55% stake to black investors, Ms Mohlala said the government had invested a substantial amount in Telkom, including about R800m for the upgrading of its network for the World Cup, and needed to protect taxpayers' money. It also wanted to open the industry more fully to competition.

She said the telecommunications infrastructure market was not fully liberalised and the government would retain its shareholding until there was effective competition.

The government is in the process of lowering the cost of telecommunications, including broadband costs, and increasing access, and expanding it to underserved areas. It is looking at lowering the high cost of line rentals for ADSL, a market Telkom dominates.

South Africa: Telkom's BEE Stake 'Should Be Bigger'

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