Business
South Africa’s Telkom stock surge on nationalization report
(Reuters) – Shares in Telkom SA Ltd., surged nearly 8 percent in early trade on Tuesday after a report said its top shareholder, the South African government, could be planning to buy the outstanding stock in the struggling company.
Telkom, in which the government owns more than a 50 percent stake jointly with the state-run pension fund, was up 3.8 percent at 21.14 rand (US$2.57) by 0953 GMT (0553 EST), on track for its biggest percentage gain in more than three months.
Citing a source close to the communication ministry, South Africa’s leading financial daily Business Day said the government could fully nationalize Africa’s biggest fixed-line phone operator.
“The government is looking for a way to direct Telkom to meet its development agenda without being hampered by the rules of the JSE,” the daily quoted the source as saying, referring to the Johannesburg Stock Exchange.
Siya Qoza, a spokesman for the communication ministry, said the Business Day report was “not close to the truth” but added the ruling African National Congress (ANC) party was best placed to comment.
“I don’t know what they want to do with Telkom but as far as I know it’s not government policy,” Qoza said. ANC spokesman Jackson Mthembu said: “I am not aware of Telkom being in any policy documents but anything is possible at the policy conference”.
The ANC has a major policy meeting next week and has been pushing for greater state control over Africa’s largest economy.
Earlier this month, the cabinet turned down KT Corp’s US$385 million offer for a stake in the company, saying it was a strategic asset in its plan to roll out internet services to all South Africans by 2020.
The deal with the South Korean firm would have diluted the government holding to less than 50 percent.
Analysts have said the rejection of KT’s offer underscored the apparent determination of the government not to cede control of a company that many in the ANC view as an arm of government.
The ANC last year tried unsuccessfully to roll back approval for Wal-Mart Stores Inc’s US$2.4 billion acquisition of retailer Massmart.
Telkom, which last week posted a one-third drop in full-year profit and suspended dividend payments for first time since 2003, has been hit by hefty start-up costs at its new mobile arm and falling sales from its mainstay fixed-line phone business.