Telkom South Africa Seeking Empowered Buyer for Its Swiftnet Electronic Division

Mergers, Acquisitions and Financial Results

Telkom continues to redefine its business activities by making a concerted effort to finally sell Swiftnet, a division that operates electronic payments including credit card verifications and point-of-sale terminal transactions.

One hurdle facing its potential sale, however, is that the buyer must be at least 30% black-owned which eliminates some players in the telecoms and technology sectors.

Telkom says shedding Swiftnet is part of the strategic review needed to reinvent its business after disinvesting from Vodacom .

Telkom's main thrust so far has been preparatory work on mobile voice and data services of its own, providing additional business services to corporate clients, and taking those packages into other countries.

Swiftnet is for sale through a bidding process its assets including a licence to build and operate its own networks. The business was formed in 1994 and operates independent ly of Telkom.

The division's customers include banks, retailers, the gaming industry and prepaid airtime sales outlets. Its technologies are also used by fleet managers for remotely monitoring their vehicles.

Telkom will first assess potential buyers to confirm they are sufficiently black empowered to take over Swiftnet's telecoms licences, and to ensure they have sufficient cash to fund their bids.

To make sure they are serious, suitors must pay a non refundable R50000 deposit for the necessary documentation to help them decide whether to continue with their bids.

They will then have to submit a financial offer. Telkom will draw up a short list, to be judged on the size of the bid, and also on business plans for growing Swiftnet and for protecting its employees and managers.

Shedding Swiftnet has been mooted in the past, but the value of the business may have taken a knock after a legal victory last year when a high court ruled that hundreds of private telecoms operators had the legal right to build their own networks.

Since those licences are no longer a rarity, the value that bidders place on the Swiftnet licence has been eroded. Telkom has also been unsuccessful in earlier attempts to find an empowerment shareholder for Swiftnet most recently in 2006 when it launched a formal process to sell a minority stake in the business.

That also came to naught, leaving Telkom now looking to sell 100% of the division. Telkom does not break down the financial contributions or costs that Swiftnet contributes to the group.

Business Day