My understanding is that there will be a good cash injection and good prospects going forward for a more intregated phone system,despite government reulations trying to keep cell and landline telephone systems apart,if the deal goes through,which now seems likely....In any case the share looks undervalued to me.For word on the corporate action see SENS....Seems to be starting to run up,suppose depends n the quickness of the regulatory process.OMO.
The interesting question is what they are going to do with the money. RSA is a declining market for them. They are doing amazing suff in Nigeria through Multi-links but it is off a very low base. Some kind of MTN partnership in the future would be very interesting indeed.
IMO the one big liability TKG has, is their copper cable network. One might ask how the network can be a liability? It is old technology, prone to cable/copper theft which is a huge problem, is very expensive to maintain due to labour costs. TKG seems keen to unbundle / outsource / sell off this part of their operation, with good reason. Getting rid of the copper network will make good business sense. They should, (and imo they intend to) concentrate on their core competency: switching and transmission of telecommunications. Simply put, keep the exchanges and the optic fibre, that is where the profits come from, get rid of the copper network, that is where the profits are being spent. I have not been following TKG developments much, being rather cheesed off with them for reasons I will not divulge here. The Unions are apparently impeding the process, as a very large proportion of TKG staff could lose their jobs in the process. IMO if and when TKG does manage to get rid of the copper network and the staff associated with it, TKG will become a superstar on ther JSE. Only my opinion please do your own research.
I'm not nearly smart enough to understand all the fundamentals and how they realte to the share price, but I do know a bit about TA and TKG broke a h&s neckline at 113.50 on 19 Sept'08 and thus my bias would be towards a lot more downside to come. Vano makes a lot of sense to me. Is it not also true with the consumer getting squeezed people are more likely to keep their cellphones (on contract) than their landlines? And from what I've heard TKG is struggling to grow market share for internet connectivity?
I do not know about Telkom's internet problems, but a cell phone connection is definitely cheaper than a landline. There are many second hand cell handsets available very cheaply, most people with cell contracts have several of them lying around. A person with pay-as-you-go only pays for his calls, no contract fees, rental or what have you. Admitted, calls are expensive per minute, but a person with limited means can have a cell phone, and it could cost him less than R50.00 per month. Telkom's minimum rental is more than that, I think. I have great respect for TA head & shoulders formation, and the TKG unbundling is still in progress, I think. No telling how it will pan out.