20100412
BUSINESS DAY

Johannesburg — FIXED-line telephone provider Telkom is in discussions to sign a contract with Zimbabwe's TelOne to provide the state-owned entity with a wide range of management services such as engineering expertise.

Telkom was reported to have been in discussions to buy a 49% stake in the fixed-line operator TelOne but last week Telkom denied those claims.

Telkom is embarking on an expansion drive across the continent to increase its revenue base following the sale of its shares in Vodacom, which contributed substantially to Telkom's earnings. It is also positioning itself to provide integrated services including IT, management services and a wide range of telecommunications products and services including mobile, which it expects to launch this year.

Charlotte Mokoena, the CE of Telkom Management Services, said last week Telkom "is not in any discussion to purchase equity in TelOne. However, the company has been discussing, and is close to concluding an agreement, to provide management services (such as professional engineering and other functional services) to assist TelOne to prepare and build for the future."

The Zimbabwean Herald newspaper reported last week that the negotiations between the parties were under way. It quoted TelOne's spokesman Collin Wilbesi saying the negotiations "are under way, but we signed a nondisclosure agreement".

According to the Herald, its sources from TelOne said the cash that would be received if a deal was struck through the partial privatisation would be used for refurbishment of equipment. Equipment at the country's sole provider of fixed-line telephone services has been vandalised and some of it worn out by age.

Telkom has operations in Zimbabwe through its internet service provider subsidiaries Africa Online and MWeb Africa.

It also owns telecommunications group Multi-Links, which gave it a presence in Africa's most populous country, Nigeria.

Although Telkom has a presence in 33 countries in Africa, the performance of those businesses, especially Multi- Links, which it bought for more than R2bn three years ago, have been sluggish.

Telkom was forced to write off about R2bn after losses from Multi-Links in its interim results for the six months to September last year.

The Nigerian subsidiaries remained a focus area for Telkom, which is restructuring the business to return it to profitability as it believes the Nigerian market had significant growth opportunities.