UPDATE: Telkom Considering Options for its Mobile Strategy

(Adds details, background.)

JOHANNESBURG -(Dow Jones)- Telkom SA, Africa's largest fixed-line phone company, is open to mergers, acquisitions and joint ventures as part of its strategy of building an integrated fixed-mobile communications platform, Chief Executive Reuben September said Thursday.

The South African company late last month broke off talks to combine its fixed-line businesses with MTN Group, sub-Saharan Africa's largest mobile operator, and sell its stake in mobile joint venture Vodacom to partner Vodafone Group.

"Everything that is feasible is desirable," September said of Telkom's options for its mobile strategy, which is currently under review.

He declined to specify when Telkom would unveil the results of its review, but during a conference call with analysts said it was likely to be months rather than quarters if the company is to achieve fixed-mobile convergence in two years' time.

September, who was named CEO in November after holding the position on an interim basis since April when Papi Molotsane unexpectedly quit after 18 months on the job, said Telkom has a number of options on the mobile front.

Telkom in November said it had received "certain expressions of interest" while it was negotiating with MTN and Vodafone, although no discussions were taking place.

"We're fortunate to have a rich optionality situation," September said, adding that it wouldn't be far fetched for Telkom to consider among its options a deal with Oger Telecom Ltd.'s Cell C, South Africa's third-largest mobile operator.

He said the situation with Vodafone is currently "frozen," but that discussions regarding equally held Vodacom would be reopened if Telkom elects to follow a strategy that would necessitate a separation from the dominant South African mobile firm.

UK-based Vodafone has repeatedly said it is interested in buying majority control of Vodacom.

Telkom was until about a year ago South Africa's only fixed-line telecommunications provider, but faces competition from rival Neotel Ltd., which received an operating license in late 2005 and is poised to launch services to consumers early next year. Neotel already is offering services to corporate clients.

Telkom also faces increasing pressure from the highly competitive mobile sector, and plans by MTN to build its own fixed-line infrastructure.

The company, which has responded to the pressures with acquisitions such as that of a majority stake in Nigerian telecoms company Multi-Links Telecommunications Ltd. and Internet service provider Africa Online Ltd. early this year, recorded an 18% decline in net profit for the six months to the end of September as it was forced to trim prices and spend more in order to fend off competition.

Telkom in a statement Nov. 28 said discussions with MTN broke down over anticipated costs and benefits. The talks with Vodafone were conditional on a deal with MTN.

Telkom's shares, which ended the day down 2.7% at 145.90 rand, have been declining steadily from a peak in early September and now are up about 3.1% on the start of the year where Johannesburg's blue-chip Top 40 index has risen almost 18%.

-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 13th December 2007