Telkom back on the ropes

Shares in Telkom lost ground in afternoon trade on the JSE, following a brief midweek respite.

By 16:00 shares in the group declined 44 cents, or 1.65%, to R26.24 on the local bourse having rallied R1.33, or 5.25%, to R26.68 on Wednesday (March 7, 2012).

Telkom advanced by its highest level in more than three years on Wednesday, Bloomberg reported, after the Korean firm KT Corp said it was still in talks with Telkom over a possible purchase deal.

“It’s going well,” KT Corp Chairman, Lee Suk Chae, said in an interview at a conference in Seoul.

Telecoms analyst at Stanlib, Fred Teeling-Smith, said: “I think that it (Telkom) has been oversold in the past few weeks and on the back of KT Corp indicating that they are still in talks with Telkom, investors probably take this as a positive. I still do not think that the KT deal will be concluded at R36.”

The original announcement, made by Telkom in October 2011, referred to a transaction with KT Corp of a 20% stake at a price of R36 per Telkom share.

Suraj Sookdhew, RMB Private Bank portfolio manager, noted that Telkom’s share price had declined more than 14% in 2012, leading some investors to believe that the group may be in an oversold position.

“The fact that both Korea Telecom and Telkom have confirmed that the two companies are still talks and are progressing well, has resulted in renewed interest in the company.”

Earlier this month, shares in the fixed line incumbent dipped below R25, amid a lack of clarity on a pending Competition Commission case, and concerns that a potential deal with Korea Telecom Corp may not go through.

“We still maintain that, given the potential anti-competitive fine and the subsequent fall in the share price, Korea Telecom may offer a price well below the one first speculated,” Sookdhew said.

The All Share Index  was up 0.67%, to 33,818, with rival firms, Vodacom (VOD), and MTN (MTN) adding 90 cents to R104.90, and 45 cents to R139.65 respectively.