Bloomberg
TELKOM’S shares have dropped almost a fifth in a week after the government said it would not sell a stake in the fixed-line operator and MTN Group said it probably would not make an offer.
The stock fell four consecutive days through Monday, declining 18 percent and wiping out gains for the year, before trading unchanged on Tuesday. The shares rose 2.86 percent to R71.85 at the close on the JSE yesterday, valuing the company at R37 billion.
Telkom’s 14-day relative strength index fell to 34.9 on Monday and closed at the same level on Tuesday, the lowest since October 15 and near the 30 level that may indicate to some technical traders the decline was overdone.
“A couple of things have come out that would probably be a bit negative for Telkom,” Michele Santangelo, the money manager at Vunani Private Clients, said yesterday.
“Definitely the MTN statement in the short term would be quite significant for them.”
MTN chief executive Sifiso Dabengwa said last week that the company was not pursuing an offer for Telkom and was not in negotiations with the fixed-line operator.
A deal probably would not happen unless “something changes significantly”, he said.
That came two days after Telecommunications Minister Siyabonga Cwele said that the government would not sell its 40 percent stake as part of plans to raise cash for state-owned power utility Eskom, which is struggling to meet demand for electricity.
“Our focus remains on our turnaround strategy and the delivery of the key business improvements we have identified,” spokeswoman Jacqui O’Sullivan said. “Market fluctuations will be influenced by any number of factors. We remain on track and focused on our delivery,” O’Sullivan said.
“If they are going to sell, they are most likely to sell Vodacom,” said Owen Nkomo, the head of Inkunzi Investments, referring to the government’s 13.9 percent stake Vodacom Group. “I do not think they will consider any of the major listed entities.”
Investors may also be concerned that Telkom’s planned R2.7bn acquisition of Business Connexion is floundering, according to Nkomo, whose Inkunzi Investments owns Telkom stock.
Telkom agreed to buy Business Connexion in May last year to boost its information technology offering. The two companies “remain committed to the proposed transaction”.