SA’s Telkom eyes NetOne investment

STATE-OWNED NetOne, the country’s second largest mobile operator, has opened talks with South African telecoms firm Telkom on a possible joint venture.

NetOne is one of 35 state-owned enterprises that have been put up for partial or full privatisation by the Government, which is seeking to prune some of its loss-making firms.

“Cabinet approval has been granted for NetOne to start negotiations on a joint venture agreement with Telkom of South Africa,” the Government announced in the Transitional Stabilisation Programme announced by Finance Minister Mthuli Ncube last Friday.

Speaking at Chatham House in London on Monday, Ncube said he has set a deadline of nine months to complete the privatisation of state firms.

A Telkom bid for NetOne, if it happens, would be the second time the South African firm has tried to reach a deal with a Zimbabwean telco. Previously, Telkom has shown interest in a deal with TelOne. In 2010, another South African firm, MTN, abandoned an attempt to take over 51 percent of NetOne.

Telkom is South Africa’s biggest landline provider, and one of the continent’s largest telecoms companies, providing data and mobile. There are no details so far as to what nature the proposed joint venture would take. Compared to Telkom, NetOne is a small operation with just 2.9 million mobile subscribers, giving it just 24 percent of a relatively small telecoms market, dominated by Econet Wireless.

Telkom’s annual revenue of $2.7 billion dwarfs the earnings of all three Zimbabwean mobile operators, who recorded combined revenues of $850 million in 2017.

NetOne was the first company to provide mobile telephony back in 1996, but years of state interference and underinvestment by its shareholder, the Government, has seen it lag behind its rivals. Playing catch-up, NetOne has received $285 million in Government-guaranteed loans from China for network expansion since 2016. NetOne has also had management and board upheavals over recent years.

After having to pay off millions in old debts last year, NetOne ended 2017 with a $57.8 million loss. At the end of the year, NetOne’s current liabilities exceeded current assets by $217.1 million.

The company, in its 2017 annual report, reported that it had received interest from potential foreign investors.

“While the Government is yet to finalise the implementation guidelines for the partial privatisation, a number of foreign entities have already expressed interest in investing in the company,” the company said, adding a new investor would inject fresh capital, restructure the balance sheet, and “set the company on a solid growth path”.

Earlier this year, the then ICT Minister Supa Mandiwanzira said any new investor into NetOne would need to make a capital injection “of not less than $400 million” into the firm.

Government is also looking to sell a stake in TelOne, the fixed line and internet firm. TelOne has already floated a bid for financial advisors for its own privatisation. A buyer is also being sought for part or all of Government’s stake in Telecel. In 2016, Government controversially acquired a 60 percent shareholding in Telecel from Vimpelcom, now known as Veon, in a $40 million deal done via ZARnet, a dormant state-owned internet company that is itself being merged with ISPs PowerTel and Africom.

Telkom, in which the South African government has a 39 percent sake, has had mixed fortunes in its previous attempts to expand in Africa. In 2011, the company was forced to sell its Nigeria investments for $10 million, a fraction of the $400 million it had paid for. In 2013, Telkom also had to sell off the pan-African ISP iWayAfrica and Africa Online.