S.Africa's Telkom retreats sharply after two-fold rise this year


This is as doubts crept in about a turnaround plan that has seen the stock double in value this year.

Telkom has been a must-have in fund managers’ portfolios this year, after investors were impressed by a cost-cutting plan by new Chief Executive Sipho Maseko, which includes slashing jobs.

“But traders appear more apprehensive about the fate of the new strategy after Telkom suspended the restructuring initiative to consult with unions”, said Bruno van Eck, a portfolio manager at Thebe Securities.


(READ MORE: Transformation strategy proving positive for Telkom)

By 1305 GMT, the stock was down 5.7 per cent at 54.96 rand, on course for its biggest daily percentage fall since March.

[DATA TKG:Telkom], which has not paid dividends in three years, is also in talks with [DATA MTN:MTN Group] about sharing networks, a deal that should also save Telkom cash. Doubts about the fate of Telkom and MTN network sharing deal which if it secures regulatory approval should also reduce costs – were also weighing on the share price.

(READ MORE: Telkom denies reports of retrenchment)

“The deal is important for Telkom in its drive to reduce the costs of running the mobile arm but if there are doubts, I’d expect the share price to take some kind of a knock,” Sibonginkosi Nyanga, an analyst at Imara SP Reid.

Unlisted wireless operator Cell C has said it is planning to oppose the network sharing deal before South African competition authorities.