PIC sells large stake in Telkom
The Public Investment Corporation (PIC) sold 26% of its stake in Telkom, reducing its shareholding below 10% for the first time in years.
On Friday, 23 August 2024, Telkom said it received formal notification that the PIC sold a beneficial interest in Telkom shares.
After the disposal, the PIC holds a total ordinary share interest of 9.949% in Telkom. On 31 March 2024, the PIC held 13.4% of Telkom shares.
This means the PIC disposed of 3.45% of the total outstanding Telkom shares. It represents 26% of its former shareholding in the telecoms company.
The Friday closing price of R26.94 per share translates into R454.5 million worth of Telkom shares that the PIC sold.
The South African government is Telkom’s biggest shareholder, with 40.5%. Combined with the PIC’s 13.4%, it enjoyed a majority shareholding of 53.9%.
The newly announced disposal of Telkom shares by the PIC brings this shareholding down to 50.45%. This means the government continues to have full control over Telkom.
The PIC’s big Telkom shareholding dates back to 2004, when it acquired a 15.1% stake in the telecommunications company.
Telkom was listed on the Johannesburg Stock Exchange (JSE) and New York Stock Exchange (NYSE) in March 2003 at R28 per share.
After Telkom’s initial public offering (IPO), the government owned 38.4% of Telkom, Thintana Communications 30%, and the rest was in public hands.
Thintana Communications was a joint venture based in the United States made up of Telkom Malaysia and SBC Communications.
It was a strategic equity partner that acquired 30% of Telkom from the South African government.
The proceeds from the sale of equity to Thintana were reinvested into Telkom to modernise the company.
In 2004, Thintana reduced its shareholding in Telkom to 15.1% by selling through a book-building exercise. The PIC bought this stake.
Thintana Communications sold its remaining 15.1% shareholding in Telkom a year later.
The government’s golden share in Telkom
When Telkom was listed, its major shareholders, the government and Thintana, were deemed significant shareholders and granted a golden share.
This golden share entitled the government and Thintana to a reservation of certain rights in the control of Telkom.
It entitled them to appoint a specific number of directors and an entitlement to veto certain decisions.
Simply put, it gave the government full control over Telkom despite the government not owning more than 50% of the company’s shareholding.
However, the rights and powers granted by the golden share expired in March 2011, and the government lost its privileges.
As of 31 March 2011, the government owned 39.8% of Telkom, the PIC 10.9%, Telkom Treasury 2.0%, and 47.3% was free float.
This is why the PIC’s share in Telkom is so important. Combined, the government and the PIC own over 50% of Telkom.
Even with the PIC’s decision to reduce its stake in the telecommunications company, it ensured that its stake would not drop the combined shareholding below 50%.
The PIC acquired a larger shareholding over the years, and by the end of the last financial year, it owned 13.4% of Telkom.
However, Telkom has not performed well. Over the last five years, Telkom has lost 66% of its value and remains under pressure.
It is, therefore, not surprising that the PIC has decided to lower its Telkom shareholding and look for better opportunities.
