If You Can’t Beat Them, Partner with Someone to Fight Them. Toto Consortium Bids for State’s 40% Stake in Telkom

If You Can’t Beat Them, Partner with Someone to Fight Them. Toto Consortium Bids for State’s 40% Stake in Telkom

Telkom can no longer help but trend. After receiving a merger offer from Rain on Thursday, the telecom giant is once again in the news today. This time, Investment firm Toto Consortium made an offer valued at $433 million (R7 billion) for the stake in the nation’s third-largest mobile-phone company. It is said that the Consortium is looking to buy the South Africa’s government’s 40.5% stake in Telkom.

Why is everyone struggling to have a stake in Telkom, how big or rich is the ‘Telkom pie’?

According to an offer letter dated July 24 seen by Bloomberg, Toto Consortium’s Telkom bid is based on a 30-day average share price of the firm, plus a 20% black empowerment discount.

“The offer is subject to the satisfactory conclusion of a due diligence of Telkom. We are not averse to collaborating with other stakeholders,” remarked Telkom.

Toto is part of a consortium that controls a 24% stake in Richards Bay Minerals, majority owned by mining giant Rio Tinto Plc. The investment is worth as much as 15 billion rand ($938 million), Toto said in the court documents.

Toto Consortium
Khumbudzo Ntshavheni

It is believed that MTN’s imminent plan to takeover Telkom as announced last month had sparked interest in the smaller South African operator, with internet-service provider Rain also announcing its intention for a merger with Telkom. Telkom had announced it would consider an offer or proposal from Rain to merge, once officially received.

Communications Minister Khumbudzo Ntshavheni, commented that the government had no plans to sell its stake in Telkom at the moment. However, she assured that development will be communicated if anything changes.

Much Ado About Telkom

The biggest threat to cell companies are fiber providers. The likes of MTN and Vodacom—South Africa’s largest telecom companies, have dominated the market for a long time. But this dominance is well threatened by the growth of fiber companies like Telkom and Vumatel. This is why MTN is pursuing the acquisition of Telkom, in an effort to compete with a prospective merger of Vodacom’s fiber network and Vumatel.

More Fiber or More 5G? Rain Looks to Cause a Merger Upset with Telkom

Rain had recounted that a merger with Telkom will offer both companies necessary assets that rivals both Vodacom and MTN. Rain had called its proposed merger a logical alternative to simply selling to MTN who are already exerting great influence in the telecom industry.

Toto Consortium’s bid hangs on the government’s acceptance. The National treasury said in an e-mailed response to questions it’s unaware of the government’s intention to sell its Telkom stake. Toto Investments previously made an approach to acquire South African Airways that was rejected within days. The firm proceeded to sue the government for a lack of transparency on the transaction. This may well be a compensation plan; or not.

For now, Telkom is the girl everyone wants, let’s see who gets her.