Government’s Telkom sale to go ahead

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Government’s Telkom sale to go ahead

Published Date: 2017-10-26 | Source: Stephen Gunnion | Author: Stephen Gunnion

Government’s Telkom sale to go ahead

Shares in the telecoms company fall on the prospect of government lightening its stake

Telkom may have been premature in withdrawing a cautionary announcement to the JSE last week after there was no movement on the government's plans to sell part of its close to 40% stake in the telecoms company. Yesterday, Finance Minister Malusi Gigaba told Parliament in his Medium Term Budget Policy Statement (MTBPS) that government does plan to offload the stake, sending shares in Telkom as much as 4.4% lower.

On 30 August, Telkom advised shareholders to trade with caution after Gigaba alluded to a Telkom sale a month earlier, but it withdrew the cautionary two weeks ago. Its shares have fallen 18% since Gigaba said in June that the government would have to sell state assets to help fund South African Airways, which has nearly R16 billion in debt due this year. It already received a R2.2 billion bailout in June and will be given a further R4.8 billion by March next year. The SA Post Office will also be recapitalised to the tune of R3.7 billion.

"We have decided to dispose of a portion of government's Telkom shares. We do not take this decision lightly, but we have had to in order to maintain the credibility of the expenditure ceiling," Gigaba told Parliament. "The expenditure ceiling is threatened in the current year, as a result of government's recapitalisation of South African Airways and the South African Post Office."

While the government will sell a portion of its Telkom shares now to avoid breaching its expenditure ceiling, it will do so with an option to buy them back at a later stage.

Telkom's shares recovered most of their losses to end trade 0.6% lower at R54.61.



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