Shares began trading Tuesday morning on the JSE Securities Exchange in Johannesburg and the New York Stock Exchange. In New York they opened at $14.10 and went as high as $14.15, before dropping back down $13.98 as of 5pm GMT. Each US-listed share represents four ordinary shares that are traded on the Johannesburg exchange. Of the 167 million shares in the offering, some 47 million were offered in the United States.

The SA government had priced the initial public offering at ZAR 28 ($3.49) a share, near the low end of its offer range, in order to assure a strong take-up of the shares in tough market conditions. This is a long way from the ZAR 33.50 ($4.17) to ZAR 40.90 ($5.09) per share the government was considering at the end of January. It is even further from the ZAR 49 ($6.10) per share it considered back in early 2000, when partial privatization was first mooted. At that time, it backed down in the face of strong union and management opposition.

Today’s revised share price gives the Johannesburg-based telco a market capitalization of ZAR 15.6bn ($1.94bn). Two years ago, before the slump in technology and telecoms stocks, Telkom was valued nearer ZAR 100bn ($11.5bn).

The decision by the SA government to sell off 25% of its 70% holding, its biggest privatization initiative to date, was taken to help pay off foreign debt and finance a budget deficit. The remaining 30% of the company is held by SBC Communications Inc and Telekom Malaysia Bhd.

Despite strong demand for the shares, the IPO has been criticized by South African trade unions, already uneasy after a company representative revealed on Monday that the Telkom’s current number of fixed lines per employee averaged 125. The company has stated it wants to match the international benchmark of 170 lines per employee.

If it unable to satisfy this with market growth, newspapers have calculated that this could mean another 10,000 employees losing their jobs. Over the last four years, Telkom has trimmed 39% of its workforce to 37,000, a deeply unpopular move in a country where unemployment figures are high.

Based on total revenue and assets, the Johannesburg-based telco is the largest communications services provider on the African continent. Its crown jewel is the 50% it owns in mobile operator Vodacom (Pty) Ltd. Vodacom dominates the local mobile phone market with a 59% market share. The South African mobile phone market is said to be the biggest on the African continent with 12 million subscribers.

The IPO was underwritten by Deutsche Bank and JP Morgan Securities.

Source: Computerwire