Telkom requires a global company’s investment to unlock its real value and help grow its market share in South Africa to better challenge Vodacom and MTN.
That is the view of Telkom board member Sung Hyock Yoon, who recently spoke to Business Times about the potential of partnering with an international telecoms player.
Telkom appointed Sung on 1 May 2022, saying he has a proven track record of turning around difficult business situations.
Sung was previously Samsung Africa CEO and president after serving in various capacities at the South Korean electronics giant.
Among his milestones, he helped to grow Samsung to the number one TV brand in the US and the world.
He is hopeful that some of his experience could help bolster Telkom’s business.
Telkom previously tried to sell a 20% stake of its business to Korea Telecom for R3.3 billion in 2012.
That deal was stopped by the communications minister at the time, Dina Pule.
Her refusal to support the sale would lead to Telkom’s share price plunging over the next 12 months.
Sung said that an investor like Korea Telecom could not only bring in additional capital but also help contribute in terms of technology and business management.
He said that Telkom and other telcos in South Africa had undervalued share prices due to the country’s political instability and crime.
Telkom was the best candidate for growth in the next five years, as it still only has about 12% market share, compared to the 41% and 31% of Vodacom and MTN, Sung said.
Sung believes with the right international injection, Telkom’s share price could easily be doubled from around R35 to R70.
“The telcos could look at it and say, if I invest billions of rand now, if I add some investment, both the financial and technology management skill set, can they improve? That’s their trigger point,”Sung stated
Therefore, Sung said Telkom would have to be well prepared if it wanted to woo an overseas telecoms player.
“We have fibre and towers all over the country, great assets,”he said.
“If we go to Korea Telecom or SK Telecom or LG U+, we have to say we have this vision and we have this plan, this strategy, but we need your help.”
“We can [also] go to the US, to Verizon or AT&T, and say the Telkom case is good.”
Openserve stake sale on the cards
Sung’s comments come after Telkom recently kicked off the sale of a stake in its fibre division — Openserve.
The company told Bloomberg it was working with Bank of America to gauge the interest of potential investors and strategic partners in Openserve.
Telkom argues that the transaction could unlock value for shareholders and boost profits.
Openserve has about 170,000km of fibre and legacy copper infrastructure in the ground, much of which was inherited from its years of being a monopoly fixed-line provider in South Africa.
But telecoms experts believe it has failed to leverage this advantage to its full potential.
Many other fibre players have entered the market and chipped away at Openserve’s fixed-line customer base.
One in particular — Vumatel — has gained and held a substantial advantage in terms of homes passed and connected.
Telkom said it would update its shareholders on the Openserve stake sale during its annual results presentation in June.
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