Telkom rises after R751m buyback
Telkom’s share price rose 2.7% on Monday after the company said it had spent R751m on buying back its own shares.
The communications and information technology group said it had bought 15.8-million shares last week, or 3% of its issued share capital, using cash. It paid an average price per share of R47.87 and bought the shares on the open market.
Telkom’s share price also rose 2% last Friday.
A Telkom spokesperson said the weak share price since mid-November had "presented an opportunity to create value for our shareholders through a share-repurchase programme".
Shmuel Simpson, an analyst at 36One Asset Management, said the positive effects of the repurchase would be offset by diminished interest earned on cash resources.
He said some shareholders might have expected Telkom to prioritise debt reduction over share repurchases.
The group’s net debt to earnings before interest, taxes, depreciation and amortisation is about 0.7.
"Telkom has its issues. It gets a substantial portion of its revenue from fixed-line, which is declining, and the last set of results showed that the decline accelerated somewhat.
"But that’s offset by the mobile division, which is doing well," said Simpson.
Some in the market may have expected the company to buy shares directly from the Public Investment Corporation, given that the government has said previously it was considering selling part of its 39% stake in the parastatal.
Discussions about the sale remained "somewhat of an overhang" on the share, since the state needed to raise cash. Simpson said the change in government may mean there will be more willingness to reduce its stake in Telkom.
The share price closed 3.03% higher at R51.