KT offer too low for Telkom’s needs: Pule

Communications Minister Dina Pule says that Korea telecommunications group KT Corp’s offer for a 20% stake in Telkom was too low to meet the group’s needs.

On Friday (1 June), SA’s cabinet blocked a deal between Telkom and KT Corp.

Minister Pule said that Telkom SA may sell stock to existing shareholders or raise debt to help fund a return to profit, Bloomberg reported.

In early May, KT Corp revised its offer for 20% in the SA telecoms firm to R25.60 rand a share, from an initial price of R36.06 a share in October 2011.

“We don’t know what conditions Telkom want,” Yung Kim, senior executive vice president at KT, told Reuters. “We will review new conditions if they are offered.”

A KT spokesman said the company was open to further negotiations with Telkom.

Government owns 39.8% of Telkom, while the Public Investment Corp, which invests state employees’ pensions, holds a 10.9% stake in Telkom.

Shares in Telkom have slipped from R37 to a current offering of R20.32 in the last year, while its market cap has declined over the same period from R19.5 billion to R10.5 billion.

“When you negotiate a deal you want the best outcome for yourself,” said Pule. “Telkom must inform government of its funding needs so a solution can be found,” she told Bloomberg.

Cabinet asked minister Pule to report back about all the options that are available for Telkom in three months’ time.

In a statement of its own, the Department of Communications (DoC) said: “In considering the proposed deal between Telkom and South Korea’s KT Corporation, cabinet took into account the fact that the Department of Communications is driving the government policy of rolling out broadband, in partnership with the private sector, to all citizens by 2020.

“Telkom is a key and strategic asset in the rollout of this telecommunications infrastructure and in the effort to improve the skills of our citizens. Government recognize the need for Telkom to implement an urgent turn-around strategy, and to get the company back on its critical centre of delivering ICT services to all South Africans, new options will be considered by both Telkom and government in this regard,” the DoC said.

To compound its misery, on Monday (4 June) Telkom revised its expected earnings in a trading statement for the year ended March 2012, saying that basic earnings per share from continuing operations are expected to be between 95% and 100% lower than the comparative period.

In March, Telkom had warned shareholders that it expected basic and headline earnings per share from continuing operations to be at least 90% and 25% lower than the previous year, respectively.

The group will publish its financial results on Friday 8 June.

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KT offer too low for Telkom’s needs: Pule