Business Maverick


Hold the line, it’s Toto, calling about the rain down in Africa

Hold the line, it’s Toto, calling about the rain down in Africa
The Telkom Tower and city tower blocks in the Hillbrow district in Johannesburg, South Africa, on 12 November 2020. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Reports about unsolicited bids for Telkom are possibly the first time the words ‘Toto’, ‘rain’ and ‘Africa’ have appeared together so many times in actual news stories.

It’s well known that when David Paich, one half of the songwriting duo of the Californian soft-rock band Toto, wrote the band’s most famous song, Africa, he had never in fact been to Africa.

To actual Africans, this was pretty obvious since he did that thing which people who have no clue about Africa do: they refer to it as a single place. They tend to think of “Africa” as though it is comparable to downtown San Francisco. Had Paich ever been to “Africa”, he might have noticed that it’s a bit larger and a lot more diverse than a suburb of LA.

Whatever the case, Toto’s 1982 hit is still listened to with affection all over the world. Except of course in “Africa”, where it’s regarded as something of a guilty pleasure by people who frequented one too many suburban parties in the 1980s.  

Africa is one of the few songs that have more than a billion listens on Spotify, and remains Toto’s outstanding hit. But even in the 1980s, the song never got higher than 18 on the SA charts, although it was number one in the US and a top-10 hit all over Europe.

This is notwithstanding some of the oddest lyrics in pop music, like the second line of the chorus, “there’s nothing that a hundred men or more could ever do”. What? But the song is saved by a sweet sense of rain coming down in Africa as a guy heads off to see his aid-worker girlfriend somewhere near a place called the Serengeti. Hence, the famous line, “I bless the rains down in Africa”.

And on the subject of blessings, what is it about Telkom? It’s been pointed out to me, I won’t say by whom, that the reports about unsolicited bids for SA’s former telephone company are possibly the first time the words ‘Toto’, ‘rain’ and ‘Africa’ have appeared together so many times in actual news stories.

And it does seem that Telkom is blessed at the moment, because it’s being … how should we say? … rained on with takeover bids. All of them are a bit odd, and, really, you have to sympathise with the Telkom board as they try to sort through these bids.

Rain’s bid was actually formally withdrawn on Tuesday because of the objection of the Takeover Regulation Panel, which was in a snit because it wasn’t informed. But presumably, the bid will formally return after all the t’s are crossed and the i’s dotted.

The Toto bid is really hard to fathom. Fresh from being turned down as a bidder for SAA, the Toto Consortium slapped down a R15-billion bid for the government’s 40% stake in Telkom. The consortium is obviously rolling in cash, because it controls a big chunk of Richards Bay Minerals, which is owned by Rio Tinto. With commodity prices running, presumably, their pockets are full at the moment.

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But, you have to ask, how much does a mining company know about the cellphone industry? In any event, the government has said it is not selling its stake. The other two contenders, rain and MTN, I have written about before, and both their offers have possibilities and complications. MTN has to get past the competition authorities and rain has to convince the larger group it is in their interests to be taken over or at least merged with a smaller company.

But what is behind this sudden popularity of Telkom? The answer, of course, is bandwidth. It took 15 years, but Icasa has now managed to auction off the radio frequency spectrum for a total of R14.4-billion. The whole process was fraught from the start, and we are beginning to see why — this bandwidth is potentially fantastically lucrative.

In the auction process, the two big players got most of the bandwidth, with MTN spending R5.2-billion and Vodacom R5.4-billion, assuming the extent of the bandwidth loosely follows the price paid for it. But, careful to ensure the smaller players were not left out, the regulatory body Icasa made sure that Telkom and rain got healthy chunks of bandwidth. Telkom spent R2.1-billion and Rain R1.4-billion.

It seems like the big players won this round but, actually, if you compare the number of users against the extent of the bandwidth won by Telkom and rain, they are the winners. Vodacom has about 45 million South African users, compared with Telkom’s 16.3 million. Telkom has less than half the bandwidth, but it has a little more than a third of the users. I’m assuming a lot here, but when it comes to usability and download speed, when the dust settles, Telkom’s customers are going to get better served.

In this way, Icasa did its job, providing a fairish split, but leaning on the scales somewhat for Telkom and rain. Rain is a private company, so it’s not a biddable entity. But Telkom is, and hence the rush for a company which was once regarded as a lumbering troglodyte of the old order.

The reason we know all this about the new bandwidth is that nobody is going berserk bidding for Cell C, which would really love some blessed rain falling on its Serengeti. But sadly, the cash-strapped company spent only R288-million on new bandwidth, so its attractiveness has been only moderately enhanced.

You have to wonder about one thing: If MTN, for example, is prepared to thump R25-billion on the table essentially for a little extra bandwidth and an assortment of variable assets, did the Icasa auction process actually garner as much as it should have? Maybe the rain should have fallen a bit heavier on Icasa than it did. DM/BM


Comments - Please in order to comment.

  • Paddy Ross says:

    Thank you, Tim, for your articles heading ‘After the Bell’ each evening. You have a knack of explaining business issues in an informative but almost invariably lighthearted manner to us mere mortals.

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