Africa's biggest fixed-line phone operator Telkom may try to poach Cell C's chief executive Jeffrey Hedberg, according to a report.

Johannesburg - The two major South African paper and pulp producers, Sappi and Mondi, have been dropped from the JSE Securities Exchange's index of the top 40 shares.

The JSE/FTSE Top 40 index reflects the performances of the 40 biggest companies on the JSE, ranked by market value. Sappi and Mondi, which have both suffered a share price slump, will be replaced by Aspen Pharmacare Holdings and Discovery Holdings

"For a company, one of the advantages of being included in an index is the visibility that it brings to that company. With the growing popularity of passive investment tools, like exchange traded funds, inclusion in an index is also bound to attract more investments into that company," said Jannie Immelman, senior general manager of information services at the JSE.

The Satrix 40 fund, one of SA's most well-known investment products, only invests in the top 40 index.

The latest development is as a further blow to the beleaguered paper groups. The companies are under duress as demand for paper products in overseas markets has dried up. Mondi Group CEO David Hathorn recently said that trading conditions have never been this difficult in the 15 years he has been with the group.

Mondi suffered a 49% slump in headline earnings in the past financial year. Sappi said recently that demand levels for coated fine paper in North America are even weaker than in Europe and prices have also dropped further.

Markets have taken a hard line on both companies. Since the start of the year, Mondi has lost 16% of its value to 2 852c/share. Sappi's share price has more than halved to 1 700c/share.

"Sappi has been the worst performing large-cap stock on the JSE over nearly all time periods, and is universally disliked," Investec Value Fund manager John Biccard said earlier.

However, he added that it was trading at a substantial discount to its net asset value (60%) and stands to benefit from declining input costs, including oil, wood and chemicals.

The changes to the index will come into effect after the close of business on Friday, March 20.