JOHANNESBURG - Telkom yesterday withdrew its cautionary announcement that advised shareholders the government could reduce its 39% interest in the company - sparking a frenzy in the market that proceeds from the disposal could be used to bail state-owned entities.
In a note to shareholders, Telkom said it was not aware of any current decision taken by the government with regards to its shareholding in the company. “Therefore, Telkom is withdrawing the cautionary announcement and caution is no longer required to be exercised when dealing in Telkom’s securities.”
Telkom spokesperson Gugulethu Maqetuka said that the decision to withdraw the announcment was procedural. “It was either we withdraw or renew it,” said Maqetuka. At the time of the announcement in August, the government's stake in Telkom was worth R14.4billion with the company saying the sale would materially affect its share price.
The Public Investment Corporation (PIC), which currently holds an 11.65percent stake in the company, was fingered as the likely buyer of the stake. In 2015, the government sold its 13.91percent stake in Vodacom to the PIC to fund Eskom.
Also read: Local banks demand R5 billion leaving SAA in distress
At the time, the government's stake in Vodacom was valued at R28.7bn. The government last month dipped into the National Revenue Fund and transferred money to SAA to allow the airline to repay loans of R3bn Citibank. The Treasury said that the money would also be used to assist SAA with its immediate working capital requirements.
In the statement announcing the payment of the money to Citibank, the Treasury said that improving the financial positions of the airline through recapitalisation had been on the government’s agenda for a while. It said the government was exploring several options “and an update would be provided during the medium-term Budget policy statement on October 25.”
Pan-African Capital Holdings chief executive Iraj Abedian said it would be tantamount to throwing money into a bottomless pit if the government sold its Telkom stake to bailout the troubled SOEs, particularly SAA. If it was properly run, the national carrier would have no problem raising money in the market
“At the moment, the banks have no confidence in the governance of SAA. So the idea of using money from Telkom to fund SAA is irresponsible,” he said. Abedian said SAA was in a bad state because the government was not willing “to do the right thing.” He said the government should appoint a “credible” board and an executive team that can turn the airline around.
Telkom shares declined 1.65percent on the JSE yesterday to close at R55.50.