PIC Trims Stake in Telkom, Holding Now Under 10%

In an unexpected strategic shift, the Public Investment Corporation (PIC), South Africa's state-owned asset manager, sold a substantial part of its investment in Telkom. With a transaction that reduced its holding to under 10%, this signified a significant change in stakeholder dynamics. As of Friday, 23 August 2024, the PIC's actions resulted in its shareholding in Telkom dropping from 13.4% to 9.949%.

A detailed examination of the transaction reveals that the PIC disposed of a 3.45% slice of the total outstanding shares of Telkom, which is effectively 26% of its previous shareholding in the telecoms giant. Based on the closing share price of R26.94, the PIC's share sale totals an investment turnover of approximately R454.5 million.

Despite the reduction in the PIC’s share, the South African government remains the principal shareholder in Telkom, with a 40.5% stake. This ensures that the collective shareholding of the government and the PIC just edges over the 50% mark at 50.45%, preserving majority control of the telecoms enterprise.

The PIC's initial major acquisition occurred in 2004 when it purchased a 15.1% share in Telkom, which followed the 2003 IPO of the company. Historically, Telkom has been a touchstone for state investment strategies, with stakeholders like Thintana Communications representing key initial investments which have shifted substantially over the years.

While Telkom was indeed a formidable market player with its listing on the JSE and NYSE at R28 per share, recent years tell a different story of struggle. In the face of a 66% decrease in value over the last five years, Telkom's allure for investors like the PIC has waned, prompting diversification towards more lucrative opportunities.

The sale is a win for corporate independence in certain respects, but for many stakeholders, it reflects broader trends of risk management and downsizing of government presence in corporate entities. As Telkom continues to fight market pressures, the latest maneuvers by the PIC may herald further changes in governance and investment strategies for South Africa's telecom sector.