(Updates with closing price in fifth paragraph.)
June 8 (Bloomberg) -- Telkom South Africa Ltd. could try negotiating a lower settlement with Helios Towers Nigeria to end a dispute over a $252 million damages claim that is holding back the sale of its Nigerian unit, Afena Capital said.
Helios Towers Nigeria, a unit of London-based Helios Investment Partners LLP, in December lodged a damages claim against Telkom’s Multi-Links unit regarding the leasing of mobile-phone towers in Nigeria. Multi-Links argued that the lease was invalid because the government hadn’t authorized building on the land where Helios Towers placed the equipment. A judge in Nigeria’s commercial capital of Lagos found the contract to be valid.
“They can either negotiate to pay a lower price with Helios, or Telkom can liquidate Multi-Links and pay Helios whatever is left, together with other creditors,” said Khulekani Dlamini, a portfolio manager at Cape Town-based Afena Capital, which has 18 billion rand ($2.7 billion) in assets.
Telkom said on April 1 it is in talks to sell its CDMA technology business to Visafone Communications Ltd. for $52 million. The settlement of the Helios lawsuit is one of the conditions of the sale, Pretoria-based Telkom said in a statement yesterday. A hearing hasn’t yet been scheduled for Helios Towers Nigeria’s damages claim and Telkom will consider all its options, it said.
The stock of Africa’s largest fixed-line operator slid as much as 3.4 percent, its biggest intraday drop since May 17, to 35.45 rand, and closed 0.5 percent down at 36.50 rand by 5 p.m. in Johannesburg. Telkom has declined 4 percent this year compared with a 5 percent gain in the five-member FTSE/JSE Africa Telecommunications Index.
The fall in Telkom’s share price is a buying opportunity, said Wilhelm Hertzog, a portfolio manager at the Cape Town-based Regarding Capital Management Ltd. The money manager holds 2.5 million Telkom shares, or 0.5 percent of the company, among its 18 billion rand worth of equities under management, according to data compiled by Bloomberg.
“At these levels there’s a lot of bad news priced into the share,” Hertzog said. “We think it offers good value at these levels and it continues to be one of our top-10 holdings.”
Telkom on May 31 issued a regulatory statement on the Stock Exchange News Service about the lawsuit, initiated by Helios on Dec. 20. The statement followed a May 22 article in the London- based Telegraph about the court case. There are no restrictions barring the sale of the CDMA business, Telkom spokesman Pynee Chetty said in an e-mailed response to questions on May 24.
The Johannesburg Stock Exchange said on May 31 that it told Telkom to provide an explanation on the Nigerian lawsuit to determine whether there was a “price-sensitive matter” that it was obligated to disclose to shareholders.
“The matter of disclosure is quite difficult,” said Irnest Kaplan, managing director of Johannesburg-based Kaplan Equity Analysts. “Do you scare shareholders by telling them of a litigation matter whose outcome is not certain? Or do you wait until there is more clarity? More disclosure is always better than less disclosure.”
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