Why the government would do well to hang up on Telkom
Share price is ripping and the government owns 40.5% of Telkom. At Tuesday’s close, that was worth R16.7bn
Does anyone in the finance ministry keep an eye on the stock market? Because if they do, they may have noticed one of this year’s sleeper success stories: Telkom.
Telkom shares have rallied to their best levels since June 2017, quite out of keeping with their listed peers Vodacom, MTN and Blue Label Telecoms, which owns mobile operator Cell C.
While Telkom has rallied a steamy 29%, MTN has gained almost 13%, but Vodacom has dropped 11% and Blue Label has lost more than a third of its value. For the most part, this is as perplexing as it is pleasing to Telkom shareholders, given the absence of any real reason behind the move.
MTN and Vodacom, for example, are the dominant players in the mobile telecommunications sphere and both dwarf Telkom in terms of size and profitability, MTN’s woes in Nigeria notwithstanding. Both continue to show growth in subscriber numbers and profitability.Telkom, on the other hand, posted a slight dip in headline earnings for the six months ended September, and retains the headache of having to grow its revenue and income streams away from its declining fixed-line business, which nonetheless still accounts for the bulk of its sales.
It makes little sense that Telkom has enjoyed such a tear, but a nimble government might now wish to seize the opportunity presented by this surprise rally and cash in. The government owns 40.5% of Telkom. At Tuesday’s close, that was worth R16.7bn.
After all, discipline in the stock market is as much knowing when to sell as when to buy.