Telkom advised shareholders on Friday (1 June) that the potential strategic venture with Korea Telecom Corporation will not go ahead.
“Telkom has been informed by the Honourable Minister of Communications that the proposed transaction between the companies had been presented to cabinet on 30 May 2012 and that cabinet had taken the decision not to support the transaction as proposed,” the group said in a statement on Friday.
However, Telkom advised that the company will be engaging with the Minister of Communications to discuss the cabinet’s decision and the implications thereof.
“This engagement will seek to obtain clarity on the context of the decision given that Korea Telecom, and the transaction, were introduced to Telkom by Government,” it said.
Maqhawe Dlamini, GM: Listed Equities at PIC, said: “There has been no formal engagement with government on their announced position. The fact that Telkom has since renewed the cautionary suggests that the negotiations will continue and therefore the deal is not off the table just yet.
“Therefore whatever the rationale government put forward to justify their position was not onerous enough to have KT walk away from Telkom, which is positive,” he said.
The PIC is wholly owned by the South African government and manages assets valued at R1.032 trillion as at 31 March 2011.
Government has a 39.8% direct ownership of Telkom.
In May, Telkom announced that it had reached an agreement regarding the terms of a potential strategic venture with KT Corporation, however, at a revised cash issue price due to a decline in its share price.
KT had been set for a strategic equity shareholding of 20% in the post-issue ordinary share capital of Telkom by way of a specific issue of shares for a cash price of R25.60 a share, down from an initial price of R36.06 a share.
By 16:25 local time, shares in Telkom traded 7.51% lower to R21.19 on the JSE.