South African phone utility Telkom announced yesterday it expected to raise up to R6,8-billion ($776-million) through its initial public offering (IPO).

Minister of Public Enterprises, Jeff Radebe, said the government would offer 139-million ordinary shares – at an indicative price range of between R33,50 and R40,90 a share – implying a market capitalisation of between R18,66-million and R22,7-million.

Government has an option to increase the offer to 167-million shares, should demand far exceed the 139-million (25% of the utility) currently offered. This would raise the public offering to 30%. The sale of ordinary shares in Telkom opened yesterday morning.

In light of the unprecedented response to the IPO – more than 1,5-million people registered for the general retail offer and Khulisa offer – government has also extended the application phase with the listing date on the JSE Securities Exchange and the New York Stock Exchange to March 4, from February 25.

The listing is designed to give significant macroeconomic benefits for the country and the government’s black economic empowerment programme.

“Firstly, the transfer of ownership to a large shareholder base will empower historically disadvantaged South Africans to benefit from shareholding in a way that has never been experienced before. It will bring in many new investors, including stokvels, into the investor market and enable them to share in the benefits of trading,” said Radebe.

“Secondly, the listing will promote a savings culture among our people and encourage a longer-term approach to wealth creation. Thirdly, government will raise significant funds from the listing of Telkom IPO that will go some way towards increasing expenditure on social delivery in the National Budget”.

Telkom CE Sizwe Nxasana also said it had extended a strategic service agreement with equity shareholders Thintana (SBC of the US and Telekom Malaysia), which holds 30% of the utility, until May 2007.

In a listing prospectus, the utility said that it, Thintana and government would not sell additional Telkom ordinary shares for 180 days following the date of the listing. Government has also agreed with Thintana that it (government) would not sell its Telkom ordinary shares for a further 545-day period after the expiry of the lock-up period.

The IPO is a major step in government’s privatisation drive, through which it hopes to raise R12-billion by the end of the financial year.

“We are very excited about this IPO, as it is a landmark event for Telkom. Our strategy is to increase profitability and cash flows, and we are committed to reducing capital expenditure, repaying our debt and reinstating dividend payments,” said Nxasana.

The utility does not expect to pay dividends for the year ended March 31, 2003, but its board recommended paying a dividend for the year to March 31, 2004, of up to 33% of the group’s reported after-tax profit.