(Updates Jo'burg closing share,New York debut paragraph 6-7)

JOHANNESBURG, March 4 (Reuters) - South Africa raised nearly four billion rand ($500 million) on Tuesday in a fanfare listing of phone utility Telkom, laying the basis for more sell-offs in the country's drive to win global financial approval.

It priced the initial public offering at 28 rand a share, near the low end of its offer range, earning 3.9 billion rand. This was less than half the 10 billion rand the government had planned to raise a year ago from its major privatisation after a steep fall in the industry's stock market value.

"We expected higher amounts than we have now," Finance Minister Trevor Manuel said. "If we had held off because of uncertainties... we may never have listed. I think that the credibility of government would be questioned a lot more."

The share closed up 0.7 percent at 28.20 rand. The operator -- which has five million fixed-line users and some eight million mobile users in Africa, the world's fastest growing telecoms market -- was the most actively traded stock by deals. It kicked off trade in New York (NYSE: TKG - News ) at $14.10. American Depository Shares (ADS) were priced at $13.98 each. There are four ordinary shares to one ADS.

The Telkom IPO was two years in the making, having been delayed by changes in telecoms policy. Delays in fixed-line competition have also extended Telkom's monopoly. The firm became only the second pure-play telecoms stock listed in Johannesburg after cellphone group MTN.

SPURS PUBLIC OWNERSHIP

The government calls the listing of a quarter of Telkom its "landmark" deal, signalling state commitment to privatisation -- a factor holding up an upgrade of the country's debt rating.

"(This listing) bodes well for future transactions," Public Enterprises Minister Jeff Radebe told the lavish gathering. Sources close to the deal said the order book was more than two times covered, with keen demand from U.S. retail investors. "Most people should be very happy with this, as it is a very favourable price, but it is not at the absolute bottom of the range, which shows there was good demand," said Steve Minnaar of the country's biggest fund manager Old Mutual Asset Managers.

Manuel said the funds would be used to cover some of the budget deficit of 1.4 percent of gross domestic product. The IPO lent support to the rand (ZAR=), sending it to a peak of 7.92 to the dollar from around 8.05 late on Monday.

The government issued 139.3 million shares to investors. More than 127.2 million went to institutional and retail investors in the United States, and to other institutional investors in South Africa and abroad. At home, the remaining 12 million went to retail investors, the issue's sponsors said. They can also issue another 21 million shares in the next 30 days to steady the market.

The offer values Telkom at 15.6 billion rand -- sharply down from its 100 billion rand valuation a few years ago, before telecoms stocks globally went into freefall. On Monday, South Africa cut the share price offer range to 27-30 rand from 33.50-40.90, citing volatile equity markets.

The IPO is South Africa's biggest attempt to spread share ownership among the black majority in an economy still dominated by whites nine years after apartheid ended. Ahead of 2004's election, the ruling ANC must ensure the public is not hurt by any steep fall in Telkom shares. It offered some buffer by giving local retail buyers a discount.

The long-delayed partial privatization included an unusual pricing scheme. Members of a group of South Africans classified as "historically disadvantaged individuals" were offered a 20% discount to the offering price on the shares. The discount, known as the Khulisa offer, was made available to those individuals who were denied the right to vote or otherwise discriminated against under apartheid. In addition, if these individuals hold on to their shares for two years, they will qualify for a loyalty bonus of one extra Telkom share for every five shares they own. All other South African citizens were allowed to buy shares at a 5% discount to the offering price.

JOB CUT WORRY

Officials are keen to avoid the experience of firms such as widely-held Deutsche Telekom  and France Telecom, whose investors have seen their shares slide 90 percent since 2000.

Radebe said the listing "made a significant contribution to the deracialisation of the securities environment". But the government faces opposition from its labour allies, who fear more job losses from the listing. Telkom has already slashed its workforce by more than a third to around 38,000. About 30 percent of South Africa's workers are unemployed.

In the year to end-March 2002, Telkom had revenue of 34 billion rand, and posted net profit of 1.2 billion rand.

SBC Communications Inc  of the United States and Telekom Malaysia Bhd  jointly own 30 percent of Telkom. The two paid more than 5.5 billion rand for their stake in 1997.