The outgoing chief operating officer of South Africa’s Telkom said on Thursday the utility’s offering of both mobile and fixed-line services would not compromise its valuation during its listing, due by March.
US-born Tom Barry, who retires from the utility on July 12, countered some analysts’ claims that the group’s valuation would suffer because of its two very different businesses.
Revenue from Telkom’s 4,9-million fixed-line base in South Africa grew at four percent in the year to March 2002, while sales from its 50% stake in mobile group Vodacom, which has some 6,8-million users, rocketed 25%.
The government plans to list around a fifth of Telkom by next March in its biggest privatisation yet. It hopes to earn at least R10-billion from the listing.
”I think the mixed bags are coming into favour and the sole plays are going out of favour,” Barry told journalists at an event to mark his departure.
”I don’t believe Vodacom would have a huge premium on its own. (Those who are) getting the best value are like SBC, which has a grip on both.”
Barry was seconded to Telkom by SBC, the number two US local telephone company, in 1998 after it took a joint 30% stake in the utility with Telekom Malaysia.
The two paid R5,8-billion, or $1,26-billion at the exchange rate then, for the stake.
INTRINSIC VALUE UP, MARKET DOWN
Asked how Telkom’s value had changed since then, Barry said: ”The intrinsic value is up, the market value is down. The market is in an awful state.”
Telkom has spent almost R50-billion on upgrading infrastructure in the past five years.
”A long time ago we decided wireless and wireline are complimentary, although there are not many synergies. You are nowhere if you don’t have both. I don’t know of any landline telephone company that has voluntarily sold their wireless business.”
But analysts, some of whom have called for a separation of the fixed and mobile businesses, say the listing will be hard.
”It’s going to be a confusing listing. There’s a dichotomy — is it a value or a growth investment? Are you going to invest just to get access to Vodacom?” said one.
Apart from the listing, the next big event on South Africa’s telecoms diary is the introduction of competition. A fixed-line operator to rival Telkom is due to be licensed later this year.
But Barry questioned the likely success of a second network operator.
”I have believed since the late 1980s that this (fixed-line) industry is truly a natural monopoly. Policymakers is the US, the EU, and other parts of the world including South Africa are testing this theory,” he said.
”Evidence over the last few years, and especially in the last 18-24 months, is proving that hypothesis is correct,” he said, referring to the huge cost of creating a phone company and the recent failure of many so-called data and other telecoms companies. – Reuters