Thursday, April 07, 2011

South Africa - Telkom has sold its Nigerian Multi-Links GSM unit

[business day] TELKOM has sold its Multi-Links Telecommunications cellular business in Nigeria to Visafone Communications for $52m, but says it will retain the Multi-Links fibre network and fixed-line operations in that country.

The cellular business makes up 90% of Telkom’s Nigerian operations, but it uses code division multiple access (CDMA) technology in a market dominated by global system for mobile communication (GSM) networks.

"It is a good thing to get rid of this. CDMA competes with GSM in Nigeria. It was the wrong move … in the first place — by their own admission," Irnest Kaplan, MD of Kaplan Equity Analysts, said yesterday . He said only five out of about every 100 cellphones in Nigeria use CDMA technology.

On Friday, Telkom spokesman Pynee Chetty said the company was in a closed period and could not comment further.

"We are not going beyond what we said in the SENS announcement," he said.

The deal, which is subject to regulatory approval, is just one millstone around the South African telecommunications utility’s neck, along with its search for a new CEO.

The company spent $410m to buy Multi-Links between 2007 and 2009 as part of its strategy to become a pan-African voice and data supplier. Last year, it said its ailing Nigerian subsidiary cost about R5bn in write-offs for the year to March 2010, as the business continued to bleed cash.

In the six months to September, Multi-Links cut its losses by 29,4% to R262m. But during the time, Telkom impaired the value of Multi-Links by a further R201m. "We are pleased to announce the successful conclusion of realigning our business model to focus on our core competencies," Jeffrey Hedberg, former acting CEO of Telkom, said on Friday. The sale was the best option for shareholders, he said.

In December, Telkom filed criminal charges against unnamed senior officials at Multi- Links, accused of offences including misconduct, gross negligence and corrupt and irregular activities.

Telkom said the findings of an Ernst & Young investigation had been handed to South African authorities, which had subsequently instituted criminal investigations.

SA’s Communications Workers Union has made allegations of corruption and breach of corporate governance against senior Telkom executives.

Analysts have indicated Telkom’s costs have continued to rise faster than revenue, resulting in a decline in profitability.

They have also blamed the government for the mess that the utility is in. It has a "golden share" in Telkom of nearly 40%. This gives it the right to appoint the chairman, and most board members.

The state also has a sizable stake in the utility through its pension fund, the Public Investment Corporation, which holds an additional chunk of 8,26%.

Telkom sells Multi-Links unit for $52m

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