THE BOTTOM LINE
Calling, calling Telkom: SAA needs your urgent assistance
As SAA prepares to take on private investors, Telkom shows how private-sector participation in SOEs works
It has been a torrid year so far for JSE-listed telecoms stocks. But with Telkom being the one notable exception, should the recovering semi-private group be used as a case study as the state looks for private investors in SAA?
Declining voice revenues and regulatory risks on all fronts have taken their toll on the telecoms sector. Vodacom, MTN and Cell C-proxy Blue Label Telecoms have all slipped more than 10% in the year to date, with Blue Label giving up nearly 40%.Telkom, whose relatively new mobile business is showing signs of gaining traction, has bucked the trend and edged slightly higher. Under CEO Sipho Maseko, the partially state-owned operator has sharpened its strategy in recent years and seems to be doing the right things. Its mobile unit offers highly competitive packages for heavy data users – a good space to play in considering that data consumption is soaring.
As JP Morgan said in a recent report, Telkom probably offers “the most compelling risk-reward trade-off in SA telecoms”. The US bank said Telkom appears to face less regulatory risk than incumbent mobile operators.
As SAA prepares to take on private investors, Telkom could be used as a perfect example of how private-sector participation in SOEs can be beneficial.
Telkom, which is only about 40% owned by the government, operates nothing like your usual SOE. It’s lean, well run, and is keeping itself relevant. Like SAA, it was also in trouble before the state took a more hands-off approach.