In the history of corporate blunders, few decisions stand out as starkly as Telkom's choice to sell its 50% stake in Vodacom. This decision, more than any other, has left a lasting mark on the South African telecommunications giant, overshadowing other missteps in its history.
Vodacom, South Africa's first GSM network, was established in 1993 as a joint venture between Telkom (50%), Vodafone (35%), and Venfin (15%). The partnership quickly turned Vodacom into a major player in the telecommunications sector. However, by 2008, Telkom decided that the joint shareholding was no longer beneficial, particularly since the shareholder agreement hindered Telkom from launching its own mobile operator.
This decision culminated in Telkom selling a 15% stake in Vodacom to Vodafone for approximately R22.5 billion in 2008, with half the proceeds distributed to shareholders via a special dividend. The remaining 35% was slated for distribution to shareholders through Vodacom's listing on the Johannesburg Stock Exchange (JSE).
The context of this decision is critical. In 2005, when Venfin decided to sell its stake, Telkom passed on the opportunity to buy it. Vodafone seized the moment, acquiring Venfin's share for around R16 billion. This move should have been a warning of Vodafone’s long-term interest and the value of maintaining their stake.
Compounding the gravity of the error were political undercurrents. The unbundling of Telkom’s stake in Vodacom was first proposed during Thabo Mbeki's presidency, but Mbeki's recall and the ensuing political upheaval within the African National Congress (ANC) complicated matters. The interim president, Kgalema Motlanthe, ultimately approved the sale just before the 2009 general elections, despite Jacob Zuma's subsequent objections to transferring control to a foreign entity.
The transaction sparked controversy, with the involvement of the Elephant Consortium, an empowerment group holding 7% of Telkom, raising eyebrows. It was alleged that members of the ANC breakaway party, Congress of the People (Cope), were heavily involved in the consortium and had borrowed extensively against their Telkom shares to fund their campaign. Vodacom's listing unlocked significant value for the consortium, enabling them to realize gains that far exceeded their initial investments.
The financial implications for Telkom were profound. Selling its Vodacom stake eliminated a significant revenue stream and strategic asset. Vodacom's subsequent growth and market dominance underscored the magnitude of Telkom's miscalculation. In stark contrast, Telkom’s foray into the Nigerian market with the acquisition of Multi-Links in 2007 was another costly mistake, costing the company over R7 billion before selling it in 2011. However, this pales in comparison to the lost potential from the Vodacom sale.
In retrospect, Telkom’s sale of its Vodacom stake represents a colossal missed opportunity. It not only deprived Telkom of a highly lucrative asset but also reshaped the competitive landscape of the South African telecommunications market. This decision remains a cautionary tale of how strategic missteps, compounded by political influences, can have long-lasting repercussions on a company’s fortunes.
Comments