Government taps Telkom for broadband rollout in South Africa

Telkom and the South African government are in advanced talks to partner in rolling out broadband products even as buyers flock to bid for the telecommunication company’s assets.

The partnership will involve Telkom’s businesses, such as the Openserve fibre unit, the government’s Broadband Infraco, and broadcast transmission services provider Sentech, Minister of Communications and Digital Technologies Mondli Gungubele said.

“We have almost agreed on how the partnership will work; we are at modalities now,” Gungubele said in an interview at Telkom’s office in Pretoria. The government isn’t interested in selling its 40% stake in Telkom, the minister said.

Telkom, which reported its first loss in a decade in the year ended March 31, has seen a flurry of proposals to acquire the company’s assets just as South Africa’s third-largest wireless company warned of a potential asset writedown of about R13 billion.

The latest offer saw the firm’s former Chief Executive Officer Sipho Maseko offering to acquire a 35% stake in Telkom, with partners Axian Telecoms and the Public Investment Corporation to form a larger African infrastructure and telecommunications business. MTN Group Ltd., Africa’s largest wireless carrier, also made an offer for Telkom last year.

“We cannot stop people from being interested in Telkom,” Chairman Geoffrey Qhena said in the interview along with the minister. “When the share price is low, people want to take advantage.”

The company’s shares, which have risen 3.3% this year, dropped 0.2% at 9:50 a.m. in Johannesburg. Telkom in March said it was seeking to sell a stake in Openserve and hired Bank of America Corp. to gauge interest from investors.

Openserve operates around 170,000 kilometres (106,000 miles) of fibre and legacy landline copper cables. The government’s Broadband Infraco manages 14,862 kilometres of fibre, making it the second-largest fibre network operator in the country, according to its annual report.

The new partnership would assist the government fulfil its ambitions to connect 80% of South Africans in the next three years, Gungubele said, without giving details.

“The relationship we have with Telkom as a shareholder has huge potential to turn the country’s future around,” the minister said.

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