Telkom to split company into four units - sources

Johannesburg - Telkom SA, taking the next step in a four-year turnaround under chief executive officer Sipho Maseko, will overhaul its structure to spur profit and may consider offering stock in some of its units in the future.

A new holding-company format will give greater autonomy to the four main businesses of South Africa’s former phone monopoly - a retail operation offering landline, wireless and internet services, as well as its IT services, wholesale broadband and real estate divisions - people familiar with the matter said.

Pretoria-based Telkom, almost 40% owned by the government, could then consider stock-market listings or sales of the units, said the people, who asked not to be named because the details aren’t public.

Telkom is creating “more-focused business units as well as a more lean and fit-for-purpose strategic corporate center,” Maseko said in an emailed response to questions, without giving details. While there are no current plans to list any of the businesses, “that could be a consideration in the future,” he said.

The shares reversed losses and rose as much as 3.7% in Johannesburg, the most since May 12. They trading 0.9% higher at R74.38 as of 14:21 local time. That values the company at R39bn ($3bn).

Maseko is looking ahead after returning Telkom to profit and overseeing a quintupling in the share price since taking the helm in 2013, giving the company a market value of R38.5bn ($3bn). The CEO has built up a mobile-phone business to offset a decline in landline use, and that division reported a maiden profit in the half-year through September. Bloomberg News reported in March that the company planned to spin off the division that holds real estate and its mobile-phone towers.

“The objective remains to devolve more autonomy to the business units,” Maseko said. “Business excellence will be driven by breaking down bureaucracy, getting our people closer to our customers and by simplifying and digitalising our many processes.”

By the end of March 2018, the four subsidiaries will each have their own balance sheet and board and will report to a head office run by Maseko, the people said. The increased focus should enable each division to perform better financially, they said. Fixed-line, wireless, internet and shops will all fall under the new retail division, according to the people.

The enterprise, or IT-services, division will be dominated by Business Connexion, a company Telkom bought two years ago to boost its appeal to corporate customers. The unit, which was re-branded to BCX in March, would be the first to be considered for a listing - potentially within 18 months, one of the people said.