There appears to be no stopping the rise in Telkom’s share price. The counter added nearly 5% on Thursday, to close near the R40 mark. It’s now flirting with levels last seen in 2010, after it offloaded its 50% stake in Vodacom to Vodafone and to shareholders.
The share closed at R39,70, up by 4,9%, after having touched a fresh multi-year high R39,85 in afternoon trading. The latest rally appears to be underpinned by remarks made this week by group CEO Sipho Maseko that Telkom intends slashing R1bn/year in costs over the next five years and cutting jobs.
The share price has rallied strongly since Maseko took the top job. Six weeks after his appointment on 1 April 2013, Telkom’s share touched an all-time low of R11,93. Since then, it has rallied by a remarkable 230%. Its market capitalisation has increased from R6,2bn to R20,5bn over the same period.
Investors appear to have discovered a fresh appetite for telecommunications stocks more broadly. Despite the recent court ruling on inter-network call rates, which could affect them negatively, both MTN and Vodacom have also been testing new highs in recent weeks.
On Thursday, Vodacom reached a fresh record high of R139,51/share — its market capitalisation has reached more than R206bn — while MTN set a new record on 28 March of R218/share. It closed on Thursday at R1 shy of that level, at R217/share. MTN’s market value is above R405bn.
But both companies’ performance has been overshadowed by the remarkable recovery in Telkom’s stock as investors warm to management’s turnaround plan.
Last month, Telkom announced it had signed a heads of agreement with rival MTN in a move designed to de-risk its loss-making Telkom Mobile business, which was launched belatedly as South Africa’s fourth mobile network operator.
In in terms of the agreement, MTN will take over the financial and operational responsibility for the roll-out and operation of Telkom’s radio access network. In addition, the two firms’ customers will be able to roam on their respective networks. Further details of the agreement are expected soon.
In June last year, just two months into his tenure, Maseko announced that Telkom would impair the carrying value of its fixed-line network by R12bn, reducing its net asset value from about R57/share to R34/share. Since, then, the share price has rallied significantly. — (c) 2014 NewsCentral Media