Crunch time for Telkom

Communications minister Dina Pule is due to hand a report to cabinet on the options for Telkom after government blocked its proposed deal with Korea’s KT Corp. By Craig Wilson.

Communications minister Dina Pule

After cabinet scuppered Telkom’s plan to sell 20% of its equity to Korea’s KT Corp, it tasked communications minister Dina Pule with reporting back to it within three months about the options available to the partly state-owned company.

If she’s going to meet cabinet’s deadline, Pule must report back to cabinet before the end of this month. One of the options reportedly under consideration is a renationalisation of the company, which was partially privatised 15 years ago.

Cabinet spokesman Jimmy Manyi says Pule did not provide a reportback at the most recent cabinet meeting and directed TechCentral to the minister’s office for further comment. Pule’s spokesman, Siya Qoza, was not immediately able to say whether the minister would report back to cabinet at its next fortnightly meeting, scheduled for 5 September. Pule was in a meeting and unavailable for comment.

In a 1 June statement explaining why it had decided not to support the KT deal — blocking it in the process — cabinet said it had taken into account the fact that the department of communications was “driving government policy of rolling out broadband, in partnership with the private sector, to all citizens by 2020”.

“Telkom is a key and strategic asset in the roll-out of this telecommunications infrastructure and in the effort to improve the skills of our citizens,” it said at the time. “Government recognises the need for Telkom to implement an urgent turnaround strategy and, to get the company back on its critical centre of delivering ICT services to all South Africans, new options will be considered by both Telkom and government in this regard.”

Telkom management was taken aback by cabinet’s decision to block the deal, especially given that a former communications minister, the late Roy Padayachie, had broached the idea of the deal and introduced the parties to one another.

Government has said it is considering the possibility of renationalising Telkom if this makes sense to achieve its aims for universal access to broadband. The state already owns almost 39,8% of Telkom directly, with the government pension fund administrator, the Public Investment Corp, holding a further 10,9%.

Trade unions, including Cosatu and its affiliate, the Communication Workers Union, came out in strong support of cabinet’s decision and have expressed their support of Telkom’s nationalisation.

Private shareholders have taken a dim view of the goings-on, sending Telkom’s share price tumbling over the past year. Though the counter has staged a modest recovery in the past month, rising from an all-time low of R17,02/share to R20,44 on Friday afternoon, it has fallen nearly 25% in the past six months and by nearly 42% in the past year.  — (c) 2012 NewsCentral Media