Mega-deal speculation

ADSL South Africa (Broadband South Africa), 9 September 2007

Speculation on an upcoming mega-deal in the telecoms market has helped to push Telkom’s share price upwards earlier this week.
 
Over a million Telkom shares changed hands and the share price went up with 3.29% or 580c to R182 in midmorning trade on Monday. This came after a ‘…news report by the Sunday Times stated the MTN and Telkom boards were mulling a proposal that the latter sell its 50% stake in Vodacom  and then MTN buy its fixed-line business’ (Telkom’s shares surge on speculation, Paul Vecchiatto, ITWEB Cape Town Correspondent). The MTN share price went slightly down hill from R108,80 to R108,60 in light trade, when 72 000 shares changed hands.
 
If it’s true that MTN is considering making an offer for Telkom’s fixed-line business and that Telkom is considering to sell, then it can only mean one thing: Telkom believes wireless services are going to overshadow fixed-line services in the not so distant future. ADSL South Africa believes Telkom will not even consider getting rid of their fixed-line business if this was not the case. Should such a deal go through it will also mean that ‘…government will effectively exit the fixed-line arena’ (Telkom’s shares surge on speculation, Paul Vecchiatto, ITWEB Cape Town Correspondent).
 
Neither MTN nor Telkom have issued cautionary announcements, a sure sign that talks are not in advanced stages, meaning that share price movements in both instances were fuelled by speculation at best. Not that we have anything against speculation. Men with great vision are labelled as speculators long before they go down in history as visionaries or men of renown.
 
According to Piet Viljoen, CEO of asset management firm Regarding: Capital Management: “Investors are hoping that Telkom sells its Vodacom stake to Vodafone [the UK network operator which also owns half of Vodacom] and then MTN buys the fixed-line business, because once Telkom sells Vodacom it is a much smaller business than MTN” (Telkom’s shares surge on speculation, Paul Vecchiatto, ITWEB Cape Town Correspondent).
 
In other words, investors are hoping that Telkom gets cut down to size in order to give true competition a chance. 
 
ADSL South Africa (Broadband South Africa) welcomes the news despite the fact that its only speculation at this stage.