June 2 (Bloomberg) -- Telkom South Africa Ltd., Africa's largest fixed-line phone company, rose the most in nine months in Johannesburg as it may be sold to Mvelaphanda Holdings Ltd. and Vodafone Group Plc.

Telkom gained 8.4 percent, giving it a market value of 79.1 billion rand ($10.3 billion). Mvelaphanda bid for the entire company, providing Telkom sells its 50 percent stake in mobile operator Vodacom Group Ltd., Pretoria-based Telkom said today in a statement. Vodafone, which owns the other half, is in talks to buy an additional 12.5 percent of Vodacom, people familiar with the negotiations said.

A sale would dismantle South Africa's former phone monopoly, which is 39 percent state-owned. Mvelaphanda, run by former freedom fighter and one-time presidential hopeful Tokyo Sexwale, holds 47 percent of mining company Mvelaphanda Resources Ltd. and has been diversifying with purchases of media firms. Sexwale helped lead the push to give blacks more power in South African business after the collapse of apartheid.

``We might see more interested parties coming out,'' Rajay Ambekar, an analyst at Cadiz African Harvest Asset Management, which manages about $7.3 billion, said by phone from Cape Town today. Telkom will evaluate all offers, the company said.

Simon Gordon, a spokesman for Vodafone, declined to comment on the size of the stake sought.

Telkom gained 11.49 rand to close at 148.49 rand in Johannesburg. Newbury, England-based Vodafone lost 1.6 pence, or 1 percent, to 160.65 pence in London.

Biggest Deal

A Telkom purchase would be the biggest foreign direct investment in South Africa, overtaking the 36.7 billion rand paid by Industrial & Commercial Bank of China Ltd. for 20 percent of Standard Bank Group Ltd., Africa's largest lender, this year.

South Africa's government ``will await further details,'' said Joe Makhafola, a spokesman for the ministry of communications.

Telkom was the country's only fixed-line operator until the entry of Neotel, which is 26 percent-owned by India's Tata Group, in 2006. On Nov. 22, Telkom appointed Reuben September as chief executive officer. He had been acting CEO since April.

Wireless operators are looking to Africa for growth because only about 20 percent of the continent's 900 million people subscribe to a mobile phone service, according to a Cap Gemini report last month. Regulators in Africa are encouraging competition, and 10 to 15 new mobile licenses may be up for sale, Cap Gemini said. In the U.K., by contrast, there are more wireless accounts than there are people.

MTN Interest

MTN Group Ltd., Africa's largest mobile-phone company, is in talks about a deal with Reliance Communications Ltd., India's second-biggest wireless company. MTN's negotiations for a merger with Bharti Airtel Ltd. failed, the company said last month.

Telkom South Africa had 4.6 million fixed-line customers on Sept. 30, down 1.2 percent from a year earlier. Ambekar said Telkom's fixed-line unit is worth as much as 50 billion rand and its stake in Vodacom between 65 billion rand and 70 billion rand.

The fixed-line business is ``extremely cheap,'' with the company's current value implying the business is ``virtually worth nothing,'' Ambekar said.

``Although there have been losses in terms of voice, other parts of the business are growing very strongly.''

Vodacom had 34 million customers at the end of March and sells mobile-phone services in South Africa, Tanzania, Lesotho, Mozambique and the Democratic Republic of the Congo. It had 56 percent share of the South African market, the continent's largest and most profitable market, on Dec. 31.

Vodacom's Markets

About 70 percent of the South African population has a mobile-phone account, while in Vodacom's other markets, penetration is 20 percent or less.

Vodafone's offer to buy more of Vodacom is contingent on Telkom then distributing the rest of the holding to shareholders. The talks with Vodafone, which started on May 14, are separate from the Mvelaphanda-led approach.

``This makes sense for them to grow in emerging markets compared with markets in North America and Europe, where there is not as much growth,'' said Peter Braendle, who helps oversee the equivalent of $56 billion, including Vodafone shares, at Swisscanto Asset Management in Zurich.

Vodafone confirmed in a statement that it was in discussions with Telkom. Sexwale spokesman Chris Vick said there is ``still a lot to discuss'' and declined to give any detail on pricing. Sexwale was an inmate at the Robben Island prison along with Nelson Mandela during apartheid.

Telkom began a strategic review a year ago and said it would consider selling its 50 percent stake in Vodacom. In November, Telkom abandoned talks to sell its mobile and fixed-line phone assets to Vodafone and MTN Group Ltd., Africa's largest wireless operator.

The planned buyout by Mvelaphanda and Och-Ziff Capital Management Group LLC, a hedge-fund manager, was reported yesterday by the Business Times, which valued the deal at 90 billion rand. It didn't reveal where it got the information.

To contact the reporter on this story: Ron Derby in Johannesburg at rderby1@bloomberg.net

Last Updated: June 2, 2008 12:19 EDT