The Public Investment Corporation (PIC), which manages the government's pension fund money, said yesterday that after making a profit of R1.5 billion by warehousing shares in Telkom, it had sold two-thirds of the stake to the Elephant Consortium.The PIC will keep 5 percent of Telkom and the Elephant Consortium 10.1 percent.

The shares were taken on by the PIC in November last year after the Elephant Consortium, led by former director-general of the department of communications Andile Ngcaba, and Women Investment Portfolio Holdings (Wiphold) were unable to come up with a viable funding structure.

The PIC bought the stake from Thintana, Telkom's US and Malaysian shareholder, for R78.74 a share, or R6.6 billion. Brian Molefe, the chief executive of the PIC, said yesterday that the shares were sold to the consortium at R92.50 a share.

The PIC realised R1.5 billion on the deal, an annualised return of 78 percent, while the consortium took on the shares at a discount of about 17 percent, given that Telkom's stock was trading at R109 yesterday. The share leapt another 1.5 percent after the PIC's announcement to close at R110.05.

The Elephant Consortium has been split into the Lion and the Buffalo consortiums, which will share the 10.1 percent stake equally. Ngcaba will lead the Lion Consortium while Wiphold, represented by Gloria Serobe, will lead the Buffalo Consortium.

Lion and Buffalo will have 6.7 percent in Telkom because there is a third element to the deal - a broad-based empowerment consortium is to be founded in the next three months to take on 3.3 percent of Telkom. Molefe hoped that the PIC would be able to sell the 3.3 percent stake to the next broad-based consortium at R92.50 a share.

Smuts Ngonyama, an ANC spokesperson, will be offered a part in the Buffalo Consortium. Serobe said it was a nightmare to put together consortiums and to recognise his role, Ngonyama would be offered a stake. She said Ngonyama would be offered a significant portion of the deal.

Ngcaba said over 50 percent of the equity of the Elephant Consortium would accrue to broad-based groupings with a strong emphasis on women's empowerment.

Colin Reddy, director of BEE Research at BusinessMap, said it was too soon to comment on the efficacy of the empowerment deal.

But in terms of the PIC holding back a 5 percent stake in Telkom, Chia-Chao Wu, the deputy chief executive at Empowerdex, said the PIC now had a fiduciary duty to make a return to investors in addition to the role it had adopted to promote empowerment.

Cosatu, which was hostile to the PIC's purchase of the shares last year, was not available for comment yesterday.

The financial backing for the new deal was put up by Nedbank, Absa and the PIC. The original 15.1 percent stake was worth about R9 billion at current market values. Lion and Buffalo's 6.7 percent was worth 3.6 billion.

The funders will be paid off by a combination of dividends and the appreciation of Telkom's share price. Telkom's stated dividend policy is to declare annual dividends in future financial years with the objective being to progressively increase the payments but not strictly follow the company's earnings pattern.

If dividends were to increase steadily, the Elephant Consortium may be able to pay its financiers faster than the five-year time frame currently allowed.