Telkom jumped as much as 12% but later gave up most of those gains after the company confirmed it’s received a bid for a controlling stake by a group of investors that includes former CEO Sipho Maseko.

The consortium, which comprises Maseko’s Afrifund, Axian Telecom and the Government Employees Pension Fund managed by the Public Investment Corp, sent Telkom an unsolicited, non-binding indicative letter for the acquisition of a controlling stake in the company that’s being assessed by the board, Telkom said in an announcement on Monday. There is no guarantee that discussions will lead to a transaction, the company said.

“The company has requested the consortium to provide further clarity on several matters, including the proposed offer price and certainty of funding,” Telkom said. “As such, discussions remain of an exploratory and non-consensual nature.”

While all South African mobile operators have faced myriad challenges, including nationwide power cuts, vandalism of infrastructure and high unemployment, larger rivals Vodacom Group and MTN Group have been able to maintain growth as Telkom struggled to keep up.

Shares of Telkom have fallen 21% over the past year, giving the company a market value of about R16-billion. The company said in February it would cut as much as 15% of its workforce, as the operator deals with an increasingly difficult operating environment and the power outages.

Telkom, a former state monopoly that controlled the fixed-line phone business, owns a number of large assets such as fibre and mobile networks.

‘Disconnect’

“Backed by a former CEO with a deep understanding of the business, we believe the bid evidences the disconnect between Telkom’s current share price and the underlying value of its assets,” Avior analyst Michael Steere said in an e-mailed response to questions. “We believe that disconnect was borne out of Telkom’s inability to realise value, either operationally or through asset sales.”

The firm’s recent R13-billion asset write-down and a constrained share price have further opened up the phone company for a possible takeover or sale of assets. MTN Group previously entertained making an offer for Telkom, but later walked away from a deal.