It is thought that the two entities have already completed due diligence and are negotiating the final sale price, although there has been no official confirmation of any deal.
Telkom has made no secret of its desire to expand into the rest of Africa. Last October, its CEO Papi Molotsane told the markets that the South African carrier was looking at a number of options including possible acquisitions of both fixed-line and mobile assets in Angola, Ghana, Kenya, Nigeria, and Uganda.
At the moment, Telkom’s only foreign exposure comes from its 50% stake in the South African mobile operator Vodacom, which besides South Africa, has mobile operations in the Democratic Republic of Congo, Tanzania, Mozambique, and Lesotho.
The success of Vodacom has meant that Telkom has posted a healthy rises in sales and profits in recent years. Telkom has enjoyed for many years a virtual monopoly in the fixed-line market in South Africa, but now faces a challenger after the South African government finally issued a second fixed-line telecoms license to SNO Telecommunication, known as Neotel, in December 2005.
Molotsane has already said he expects Telkom to lose between 10% and 15% of its home fixed-line market over the next three to five years thanks to the increased competition and tariff reductions. Yet despite the arrival of a new competitor, Telkom still enjoys a market where it can operate virtually unopposed and is still a relatively cash rich operation, giving it the financial muscle to expand if it so chooses.
The Ugandan market is attractive because out of a population of nearly 30 million, only 117,000 people are thought to have access to fixed-line communications. Uganda Telecom has about 100,000 fixed-line customers, with 500,000 mobile phone subscribers out of the total 2.2 million mobile phone subscriber base.
The Ucom consortium is 60% held by Telecel, while Germany’s Detecon and Egyptian group Orascom hold 20% each.
