A cheque for more than R800-million could soon be winging its way to former Department of Communications director general and Dimension Data chairperson Andile Ngcaba.
If continuing talks between Telkom, Vodafone and MTN materialise into a deal where Telkom offloads its 50% stake in mobile partner Vodacom, valued at between R70-billion and R75-billion, Ngcaba and other Elephant Consortium partners stand to be handsomely rewarded.
Other Telkom shareholders such as the Public Investment Corporation, which holds a 13,3% shareholding, and the government, which holds a 37% shareholding, would also get big cheques.
It is unclear what finance costs Ngcaba would have to settle still if he is paid out for his Telkom shares.
The Mail & Guardian understands that Vodafone had put in a bid for Telkom’s 50% share of Vodacom, but could be looking for a local empowerment partner as a co-investor.
A private consortium headed by well-connected businessman Barend Hendricks is bidding for 35% of the 50% stake in Vodacom, but it is unclear whether Vodafone would settle for only a further 15% in the mobile giant.
Hendricks was part of the Elephant Consortium, which secured a 6,7% shareholding in Telkom back in 2005, and stands to benefit from the sale of the 50% stake in Vodacom.
The probable sale of Telkom’s interest in Vodacom to Vodafone and an empowerment player raises the prospect of Telkom cutting a deal with Vodacom rival MTN. Both Telkom and MTN issued JSE cautionaries this week, saying they were in talks.
The talks could lead to the two merging, leading to further consolidation and less competition, thwarting the government’s stated intention of bringing lower prices for consumers.
This followed reports at the weekend that Telkom was set to sell its share in Vodacom to UK mobile giant Vodafone and that Telkom was considering two offers for its fixed-line business.
The M&G understands that MTN is in fact the only bidder for Telkom’s fixed-line business and that Hendricks’s private consortium is bidding for a slice of Vodacom.
Following the cautionaries, Telkom’s share price skyrocketed by 8,39% to close at R190,99 on Monday, valuing the company at R103-billion. MTN’s share price dropped 2,57% to close at R106.
The talks have led to a torrent of speculation, with analysts mapping out numerous deals that could take place.
Most analysts were fairly confident Telkom would sell its Vodacom stake to Vodafone, but it is unclear what form the MTN/Telkom deal would take.
After a string of acquisitions MTN does not have the cash to buy what is left of Telkom after a sell-off to Vodafone but, capitalised at R200-billion, it could offer shares to fund a possible merger or acquisition.
Another possibility, according to analysts, is that Telkom could become a subsidiary under MTN, which would allow the two to expand into Africa together.
It is possible the new Vodacom could launch its own, rival bid for what remains of Telkom. However, some analysts believe the government would not allow a foreign company to own these assets.
The relationship between Telkom and Vodacom has been fractious of late, with many analysts speculating that the partnership was doomed to come apart at the seams, as both parties moved to encroach on each other’s turf.
Key to this faltering relationship was the fact that Vodafone, which already owns the other 50% stake in Vodacom, was preventing the South African mobile giant from moving further into Africa.
A possible deal would fit with Vodafone’s desire to offset slow growth in saturated, developed countries with fast growth in emerging markets.
Control of Vodacom would give it operations in Tanzania, Congo, Lesotho and Mozambique to add to its operations in Kenya, Egypt, India and Turkey.
Telkom has expressed a desperate need to move into Africa, but without a mobile partner to take along for the ride, this has been difficult.
Most analysts the M&G spoke to this week believe any potential merger or acquisition between MTN and Telkom would position Telkom nicely to expand into Africa and the Middle East, alongside MTN.
MTN has made sizeable investments in emerging markets, with its $5,5-billion purchase of Lebanon-based mobile operator Investcom last year.
The deal widened MTN’s footprint from 11 to 21 countries, including substantial markets in Syria, Ghana and Yemen to add to its other expansions into Côte d’Ivoire, Botswana and Zambia, and increased its subscriber base by five million.
One expert, who asked not to be named, said there seemed to be many permutations of how the deal could play out, but the one he feared most was that Telkom’s name would simply be replaced by MTN and “exploitation and super-profits continue as before”, with the government as a major shareholder in the combined entity.
This observer also raised the fact that the Public Investment Corporation, a 13,28% shareholder in Telkom, already owns more than 11% of MTN.
Most analysts said the mooted deal would be bad news for telecoms consumers in South Africa.
“It doesn’t bode well for the consumer, from the large corporates to Joe Soap in the street,” said BMI-TechKnowledge telecoms analyst Richard Hurst.
“You have to ask the question: Is a private monopoly not more evil than a public monopoly?” said Dave Gale from Storm Telecoms.
Gale said the mooted deal was a spin-off of the government’s failed managed liberalisation policy for the telecommunications sector.
“I don’t think it is going to be a particularly good move if we end up with fewer players and a bigger monopoly,” he said.
He doubted a merger or acquisition between MTN and Telkom would get approval from the competition authorities. “If they couldn’t get the Telkom/Business Connexion deal through, how the hell are they going to get this through?” he asked.
Another analyst described approval by the competition authorities for any merger or acquisition as a “red light on the dashboard”.
“I don’t see them approving this,” said the analyst. “It’s going to be very difficult to get this past the Competition Commission.”
However, another analyst said he thought the deal would get the green light from the competition authorities, stating that a move that saw Telkom aligned with the second-biggest mobile player in South Africa rather than the biggest would be seen favourably.
Hurst said that if Telkom were to become a subsidiary of MTN, the vastly difficult corporate cultures would make it a very frustrating restructuring exercise for MTN.
“The unions are going to jump up and down,” said Hurst. “They have already been at Telkom over its restructuring process.”
Telkom spokesperson Lulu Letlape confirmed that preliminary talks among the three telecoms players were continuing, but refused to comment further.
MTN Group spokesperson Nozipho January-Bardill said the group could not comment.
Businessman Barend Hendricks said he could not comment on ongoing business and that discussions were at a very sensitive stage.
Attempts to contact Andile Ngcaba were unsuccessful by the time of going to print.