Telecommunications & postal services minister Siyabonga Cwele has defended government’s decision not to sell its stake in Telkom, saying it has been vindicated by the strong performance of the company’s share price in the past few years.
At the recommendation of one of Cwele’s predecessors, former communications minister Dina Pule, government shot down a plan by Telkom management — at the time led by CEO Nombulelo Moholi — to sell a strategic equity stake in Telkom to Korea’s KT Corp. The decision to block the sale drew intense criticism from analysts; it ultimately led to Moholi’s exit.
But on Monday, following publication of Telkom’s annual results for the year ended 31 March 2016 — the numbers prompted a sharp rally in the company’s share price — Cwele said government was right to hang onto its stake.
“It is most pleasing to see the strong performance Telkom has achieved in such a competitive national and global environment,” Cwele said in a statement.
“We welcome that Telkom has performed steadily over the past four years, especially given that there were suggestions that it be sold,” the minister added.
“The current share price is a demonstration of the correctness of government’s decision to keep its investment in the company.”
Cwele said both the board and the executive management team had “done well to change the fortunes of Telkom in this period”.
But, he said: “More work still needs to be done.”
He said the transformation at Telkom provides “useful pointers” on how to change the fortunes of state-owned companies.
“Government and other shareholders decided to give Telkom a strong board of directors, who in turn appointed a capable management team to improve the performance and sustainability of the company,” Cwele said in the statement.
“It is noteworthy that the board and management did not request a capital injection to change the fortunes of Telkom. As shareholders, all we gave Telkom was a level of autonomy while ensuring accountability of this state-owned company,” he said.
“We are happy that once again we will get a substantial dividend from Telkom. While we know that the dividend will go into the national revenue fund, it is our view that we should start to reinvest a substantial amount in the roll-out of modern ICT infrastructure.”
Telkom’s share price traded up by as much as 9,7% after it published better than expected annual results on Monday. At the time of writing, the share was trading at R64,99, up by 8,3% on the session. — © 2016 NewsCentral Media