Telkom sticking to its guns over KT Corp deal
Telkom says that a strategic venture with Korea based KT Corporation would be in the group’s best interest, despite a block by Cabinet last week (1 June).
On Friday, Telkom announced a marginal decline in operating revenue to R33.1 billion, for the year ended March 2012.
However, headline profit for the year fell 32.8% to R1.658 billion, while profit after tax for the year declined 93% to R179 million. Group EBITDA margin decreased to 25.8% from 28.1%.
Headline earnings per share decreased 33.0% to 324.7 cents per share and basic earnings per share decreased 97.8% to 10.4 cents.
On 8 May 2012, Telkom announced that it had reached an in-principle agreement with KT regarding the terms of a venture that would see KT acquiring a strategic equity shareholding of 20% in Telkom by way of a specific issue of shares for cash at a cut price of R25.60 per new Telkom ordinary share.
Telkom and KT were also expected to enter into a 5-year co-source management services agreement to formalise the relationship and identified areas of mutual strategic and business co-operation.
“The in-principle agreement was reached following an extensive investigation period into the merits of the potential strategic venture spanning 9 months by the management teams and advisors of KT and Telkom,” the group said.
Telkom said it was informed by the Minister of Communications, Dina Pule, that the proposed transaction between the companies had been presented to the cabinet of the South African Government and that cabinet had taken the decision not to support the transaction as proposed.
Cabinet did not give any reasons for its block, however, minister Pule was of the opinion that KT Corp’s offer for a 20% stake in Telkom was too low to meet the group’s needs.
“Having considered all factors, the board of Telkom, remains of the view that the Potential Strategic Venture would be in the best interest of Telkom, its employees, customers and shareholders. Telkom will continue to engage the South African Government further,’ the group said.
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