Communications Minister Dina Pule. Picture: Jason Boud.

The nationalisation of Telkom is one of the options being discussed for the future of the ailing fixed-line telecommunications provider as the government pushes ahead with its plans to roll out technology infrastructure countrywide.

Communications Minister Dina Pule and Tshediso Matona, the director-general of the Department of Public Enterprises, confirmed that nationalisation was among the options being mulled.

Speaking in an interview with Business Report, Pule said she had been tasked with providing options for Telkom, which went public a mere nine years ago.

During that time, Telkom has lurched from one misstep to another, racking up massive losses along the way as it wrestles with stiff competition from cellphone operators.

To help the process, Pule said the cabinet had given her a high-level team comprising Finance Minister Pravin Gordhan, Public Enterprises Minister Malusi Gigaba, State Security Minister Siyabonga Cwele and Defence and Military Veterans Minister Nosiviwe Mapisa-Nqakula to investigate options.

The renationalisation of Telkom featured in several discussions at the ANC’s national policy conference held in June.

“We have a few options that I would not want to divulge now because I have to report through [the] cabinet. Once we go to [the] cabinet and if they support us, I can come back and say these are the options that we have,” Pule said.

But what the team had said was that “one of the options is that we want to see Telkom roll out broadband or infrastructure in the entire country because they are the best entity that we have for now and that’s what we’re looking at”, she said, adding that some might construe this as wanting to nationalise Telkom.

“Others will ask me what does that mean? Does it mean you want to nationalise because we’ve had the policy conference of the ANC and people there were talking about nationalisation?

“My answer to that, I will say no. We have not even come close to thinking about nationalisation,” said Pule.

Even so, she said nationalisation would be part of a whole range of options under consideration and there were numerous questions about what nationalisation would mean.

“I think those are going to be part of the options and if we say nationalisation, what does it mean? Would [the] government have that money to pay all the other shareholders, and what then will happen to Telkom after that? So these are the questions that we sit with. Of course with the processes that are happening at the ANC level, we think we can always throw in our views to those processes and any other person in the country can do that.”

Pule said now was the time for anybody to share their views on Telkom’s direction.

She said officials had been scheduled to brief her this past Thursday on what work had been done in coming up with options for Telkom.

Investment and industry analysts have previously suggested that Telkom should split its assets and complete privatisation to unlock value.

Its fixed-line subscriber base is being eroded by growth in cellphone telephony while 8.ta, its cellular business, continues to burn cash due to start-up costs. Telkom is still a leader in business services, however.

Absa Investments analyst Chris Gilmour said nationalisation “probably is the inevitable end for the monopolist”. Telkom’s market capitalisation as of Friday was R9.5 billion and the government would have to part with about R4.7bn to pay out minority shareholders.

Gilmour said nationalisation would add to public debt at a time when the state did not need an additional expense, but that the state “can always get money to buy something”, possibly through issuing a bond. He said, however, renationalisation would be expensive for many years to come.

It would require a major infrastructure investment into projects such as the roll-out of broadband into rural areas.

Failed talks with KT Corporation, after the government rejected the South Korean firm’s R3bn bid for 20 percent of Telkom, were expected to make it difficult for the company to again attract international investor appetite.

The ANC has yet to reveal its stance on the Telkom issue, saying a decision would follow from the party’s elective conference to be held in Mangaung in December.

The way forward for the JSE-listed Telkom will have to be a delicate balance between political agendas and corporate shareholder expectations.

Telkom maintains a vast network of more than 140 000km of telecoms infrastructure that is critical to the state’s social ambitions of rolling out broadband to 100 percent of the population by the year 2020.

“There’s no decision yet… One can’t pre-empt what the shareholding is going to be,” Matona said on Friday.

“It may well be that the existing shareholding is kept or there’s a buyout of minority shareholders.

“All of this is very exploratory at this stage.”

Meanwhile, Gigaba said talks were under way for the alignment and possible consolidation of state telecommunications assets including Telkom, of which the government, through its direct stake of 39.8 percent and the Public Investment Corporation’s 10.9 percent, owns 50.7 percent.

Gigaba said a national broadband strategy was critical and his department would participate in the finalisation of the policy. “[The] government is of the view that infrastructure provision requires that the state should play a bigger role.”

Telkom shares closed 0.2 percent down at R18.31 on Friday. – With additional reporting by Ayanda Mdluli