Telkom to list in March

By Phillip de Wet for Telkom
Johannesburg, 30 Jan 2003

Telkom is to list on the Johannesburg and New York stock exchanges on 4 March, with a market capitalisation of between R18 billion and R23 billion.

The government today finally revealed details of the proposed listing from which public enterprises minister Jeff Radebe says "there is no turning back", bar global developments that could affect the listing price.

South Africans will be able to purchase their shares at a discount of 5% in the case of the general offer, or 20% for the Khulisa special offer. The government is tight-lipped on the details of the Khulisa discount scheme, saying only that it has maintained flexibility in setting the criteria by which Khulisa applicants will be judged.

It is also not yet known what percentage of the offering will go to foreign institutions, with financial advisors saying there has been no decision on the ideal split between public and institutional shareholders.

Twenty-five percent of the company is to be listed, with an additional 15% available to cover over-allotment. The share is expected to be offered at a price of between R33.50 and R40.90.

South Africans will have to invest a minimum of R500 to take part in either the general or Khulisa offers. Applications can be made in multiples of R100 above that and in multiples of R1 000 for bids above R1 000.

Khulisa is limited to a maximum of a R5 000 investment per person and shares bought through it may not be sold in the first three months of the listing. For every five Khulisa shares not sold in the first two years after listing, the holder will be given one share as a loyalty reward.

More than 1.5 million citizens have registered interest in taking part in the offer, although it is not known what percentage will actually participate.

Share applications and payment is due by 20 February.

A not-so rosy picture

Although the estimated listing price is below what many expected, the government, which will remain the largest shareholder in the company, says the offer is compelling. Telkom expects to continue increasing its profit margins by running a tight ship, and Vodacom, of which Telkom owns 50%, says SA has six million more cellular subscribers up for grabs.

However, the risk factors Telkom is forced to disclose under American listing rules paint a different picture.

Eight pages in the Telkom prospectus cover the risks the company faces, ranging from depressed revenues when its competitor is finally introduced, to the chance that a legal tussle with US Telcordia Technologies could cost it more than R1 billion.

The issue of competition is likely to weigh heavily on investors` minds. Telkom CFO Anthony Lewis admits much of the company`s recent revenue growth was fuelled by increased tariffs. In recent years, Telkom has increased its rates by the maximum amount allowed by law, tangling with regulators in the process. It is unlikely to be able to do the same once it has competition in its market.