By Nqobile Dludla
JOHANNESBURG (Reuters) -South Africa’s Telkom could start the sale of a minority stake in its core fibre business by March, it said on Tuesday, as part of a slew of measures it announced to unlock value and shore up profits, pushing its shares up 7%.
Telkom, which owns a big chunk of the fast growing home and business fibre market, had been a potential acquisition target in the past for the continent’s biggest telecom player MTN with smaller rival rain considering it for a merger.
While both did not pursue the plans, the country’s third biggest telecom player has been looking at options to save costs to improve operating margins at a time when South Africa’s power crisis and inflationary pressures are hurting the company.
Its third-quarter core profit declined by 13.5% as crippling power cuts inflated costs and impacted its service revenue, it reported earlier on Tuesday.
Telkom said it was in the market to gauge buyer interest and a formal process could be launched by the end of March, adding that the end goal for fibre business Openserve would be to sell a minority stake in it.
It is expecting offers for its tower and masts business also by March.
Telkom, which has spun off its towers and masts and fibre businesses into separate units, has been exploring options to unlock value in these businesses, as management believes that the market is undervaluing them.
Some analysts peg the discount its shares trade at to its actual value at around 40%.
It also announced a cost-saving drive to increase profits which have been impacted by rolling power cuts and high working capital requirements.
While it did not divulge the specifics of the cost saving drive, Telkom said it aims to cut costs “over the next 6-18 months and return to a blended group EBITDA margin of more than 25%.”
It is also looking to raise 1 billion rand ($55.99 million)through another sales process but said despite the measures, the profitability and free cash flows for the fourth quarter would be under pressure.
In a separate statement, Telkom announced that it was considering a business restructuring process that will impact up to 15% of its 11,898 group workforce.
($1 = 17.8606 rand)
(Reporting by Nqobile Dludla; Editing by Robert Birsel, Promit Mukherjee and Emelia Sithole-Matarise)
