Telkom soars on turnaround hopes

The counter has added 185% since May on the expectation that the company’s new management team, under Sipho Maseko, is on track to deliver a promised turnaround. By Duncan McLeod.

Sipho Maseko

Sipho Maseko

Telkom’s share price touched a fresh 52-week high on Monday as investors continued to pile back into the company on the expectation that it will begin to deliver on a promised turnaround in its fortunes in 2014.

In intraday trading on Monday, Telkom was trading as high as R34,03/share, up by nearly 6%. The counter has added almost 15% in the past week alone, taking its market capitalisation to R17,6bn, a near doubling from a year ago.

By way of comparison, rival MTN has added 21% over the past year, while Vodacom is trading just 8,5% higher. However, over three years, MTN and Vodacom have delivered far better returns to investors.

Since Telkom’s share priced reached its all-time low of R11,93 in 6 May 2013 — a month after former Vodacom group chief operating officer Sipho Maseko took the reins at the partially state-owned telecommunications operator — it has gained a staggering 185%. That means that R10 000 invested in Telkom just eight months ago would now be worth R28 500.

The share is now approaching levels last seen in 2010, when the company disposed of its stake in Vodacom to the UK’s Vodafone and to Telkom shareholders. Telkom group head of strategy Miriam Altman described the decision, taken by a previous management team, to sell Vodacom as one of the company’s biggest mistakes.

Telkom has engaged in a number of failed ventures over the past decade, including pumping hundreds of millions of rand into a failed attempt to build a rival to MultiChoice’s DStv and more than R10bn into Multi-Links, a failed Nigerian telecoms business.

Monday’s share price gains come after a report by Bloomberg, a wire news service, that Maseko had said in an interview that he planned to retrench as many as a thousand managers and reduce Telkom’s staff of 21 000 people by a third within the next five years.

However, Maseko on Monday appeared to attempt to allay concerns over his earlier remarks, telling Business Day that details of the restructuring, including the number of jobs that would be affected, had not been finalised.

Top of mind for Maseko is finding a way to reduce ongoing losses at Telkom’s mobile business. The plan to “de-risk” the loss-making Telkom Mobile could lead to a transaction with rival MTN, TechCentral reported in November. The two operators are in sensitive discussions about a possible deal, two separate and well-placed sources said at the time.

Ironically, MTN considered an acquisition of Telkom in 2007, but backed away. More recently, Telkom entered into a national roaming agreement with MTN, allowing it to use the latter’s infrastructure in areas where it does not have coverage.

Maseko said in November that whatever deal was reached, it should reduce Telkom Mobile’s “capital appetite”.  — (c) 2014 NewsCentral Media

Share this article

Why TechCentral?

We know that as a prospective advertiser, you are spoilt for choice. Our job is to demonstrate why TechCentral delivers the best return for your advertising spend.

TechCentral is South Africa’s online technology news leader. We don’t say that lightly. We believe we produce the country’s best and most insightful online tech news aimed at industry professionals and those interested in the fast-changing world of technology.

We provide news, reviews and comment, without fear or favour, that is of direct relevance to our fast-expanding audience. Proportionately, we provide the largest local audience of all technology-focused online publishers.

We do not constantly regurgitate press releases to draw in search engine traffic — we believe websites that do so are doing their readers and advertisers a disservice. Nor do we sell “editorial features”, offer advertising “press offices” or rely on online bulletin-board forums of questionable value to advertisers to bolster our traffic.

TechCentral, which is edited and written by award-winning South African journalists, cares about delivering top-quality content to draw in the business and consumer readers that are of most interest to technology advertisers.

We’d like the opportunity to demonstrate the value of directing a portion of your advertising budget to TechCentral, whether your company is in the technology field or not. Numerous opportunities exist for companies interested in reaching our audience of key decision-makers in South Africa’s dynamic information and communications technology sector. We offer packages that will deliver among the best returns on investment available in the online technology news space.

For more information about advertising opportunities, and how your organisation can benefit by publicising itself on TechCentral, please call us on 011-792-0449 during office hours. Or send us an e-mail and ask for our latest rate card and brochure.