Telkom provides update on KT Corp deal
Telecommunications group Telkom (TKG) advised shareholders on Friday that a “diagnostic review” concerning a potential deal with Korea based telecommunications group, KT Corporation “is well progressed”.
In October, Telkom said it had entered into discussions with KT to explore KT potentially acquiring a strategic equity shareholding of 20% in the post-issue ordinary share capital of Telkom.
On Friday, Telkom informed its shareholders that both companies expect to finalise their findings within the next few weeks.
The companies signed a memorandum of understanding (MoU) in December and agreed to an exclusive period of engagement and information exchange to confirm the areas of mutual strategic and business cooperation and an assessment of the potential strategic venture.
“Following the successful completion of the diagnostic review, the companies would then seek to present the findings to their respective boards of directors and engage with key stakeholders before finalising the transaction agreements and presenting the transaction to Telkom shareholders for approval.
“Shareholders are advised that discussions regarding the potential strategic venture are ongoing and there is still no certainty that a formal transaction will be proposed or concluded,” Telkom said in a note to its shareholders.
Telkom said in October that, should the two companies reach an agreement, KT would buy Telkom ordinary shares, by way of a specific issue of Telkom shares, at a price of R36.06 per share – which if implemented, would result in KT having a 20% interest in the post-issue ordinary share capital of Telkom, worth about US$600 million (R4.7bn).
KT has a market capitalisation of approximately US$10 billion. In 2010, it reached circa US$18.7 billion of operating revenues with earnings before interest, tax, depreciation and amortisation of circa US$4.7 billion.
The group is a market leader in the Republic of Korea’s fixed and broadband segment with an 86% and 45% market share respectively, and number two in the mobile business (32% market share, with approximately 16.8m subscribers).
In early trade, shares in Telkom advanced 14 cents to R28.99 on the JSE.
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