Telkom intends to sell a stake in fibre behemoth Openserve

Telkom said “various initiatives” are ongoing to sell a minority share in its wholesale and network segment, Openserve.

This comes after the legal split of Openserve into a separate business on September 1, 2022.

Telkom announced in a trade update with its quarterly results on Tuesday that it has received multiple unsolicited offers for Openserve.

“[Telkom] is currently undertaking a market-sounding exercise to test the breadth of interest for this deemed to be core business of Telkom,” the company said.

“With adequate interest, a formal process will be launched by the end of the 2023 financial year.”

The possible sale of a minority position in Openserve comes as Vodacom and Remgro-owned CIVH attempt to finalise a transaction that would combine the mobile operator’s fibre assets with those of Vumatel and Dark Fibre Africa (DFA).

In preparation of the transaction, Community Investment Ventures Holdings (CIVH) has already spun out Vumatel and DFA into a new holding company named Maziv.

If the agreement is approved by the Competition Commission, Vodacom would purchase 30% of Maziv’s assets for around R13.2 billion.

While CIVH will keep 70% of the stakes, the stakes will be co-controlling. In addition, Vodacom has the option of increasing its shareholding to 40%.

Once integrated into Maziv, Vodacom’s fibre network, like Vumatel and DFA’s, will become open access.

Despite Telkom’s previous dominance in fixed-line broadband, Vumatel is presently South Africa’s largest fibre-to-the-home provider in terms of households passed and connected.

However, when it comes to the length of cable in the ground, Openserve’s fibre network dwarfs its competitors, with nearly 169,000km compared to Vumatel and DFA’s combined 44,000km.

As a result, Openserve is an appealing acquisition for a business like MTN that wants to safeguard its competitiveness if Vodacom’s Vumatel transaction goes through.

MTN began talks last year to acquire Telkom in exchange for shares or a combination of cash and shares.

Rain, on the other hand, sank the discussions with its own proposal: it wanted Telkom to purchase Rain in exchange for freshly issued Telkom shares.

Telkom stepped away from the bargaining table after failing to persuade MTN that it would assess the proposals independently or provide a schedule for how long it would take to review Rain’s proposal.

Since then, MTN Group CEO Ralph Mupita has stated that the strategic basis for MTN and Telkom combination has not changed.

He would not, however, comment on resuming talks with Telkom.