Telkom South Africa (Telkom) was privatized by the South African government in March 1997. SBC Communications and Telekom Malaysia formed a consortium, called Thintana, in order to pool their resources and purchase 30% of Telkom. Our case, Telkom South Africa, is a narrative of this privatization written from the perspective of SBC Communications (San Antonio, Texas). The case focuses on major themes surrounding the deal: the opportunity, the risks and concerns (both country- and company-specific), the Thintana consortium, and the valuation process.

Major considerations of SBC Communications are the bidding price, the uncertain sovereign risks involved, the length of the monopoly, as well as the huge potential of South Africa as a telecom hub to Africa. Telkom has a 5-year state-enforced monopoly that begins in early 1997 and expires in 2002. However, if certain African National Congress (ANC) goals are met (specifically, the number of lines installed and an increase in black management at Telkom), the government will extend the monopoly for an additional year.

The main decision points are whether SBC Communications should bid for Telkom and, if so, how much should it offer to pay for 30% of the company.

The case opens with Deutsche Telekom, the favored bidder, pulling out of the bidding process at the 11^th hour. SBC is cautious since it is unaware of Deutsche Telekom’s motives for withdrawing and is forced to reconsider the attractiveness of the deal.

 To receive:

The Telkom South Africa case (with exhibits) click here.

The Telkom South Africa: Teaching Note (with exhibits) click here.

A PowerPoint presentation on Telkom South Africa click here.