{"id":6059,"date":"2012-02-14T23:17:33","date_gmt":"2012-02-14T23:17:33","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=6059"},"modified":"2012-02-15T05:21:08","modified_gmt":"2012-02-15T05:21:08","slug":"telkom-fine-clarity-positive-for-kt-deal-analysts","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/telecommunications\/6059\/telkom-fine-clarity-positive-for-kt-deal-analysts\/","title":{"rendered":"Telkom fine clarity positive for KT deal – analysts"},"content":{"rendered":"

A potential R3.5 billion fine facing Telkom<\/a> (TKG) for abusing its market dominance would not impact on the long-term structuring of a potential deal with KT Corporation<\/a>, according to analysts.<\/p>\n

In October, Telkom entered into discussions with Korea based KT to explore KT potentially acquiring a strategic equity shareholding of 20% in the post-issue ordinary share capital of the group.<\/p>\n

At the end of January, Telkom advised shareholders that a \u201cdiagnostic review\u201d concerning a potential deal with KT \u201cis well progressed\u201d adding that both companies expected to finalise their findings within the next few weeks.<\/p>\n

The outcome of Telkom\u2019s abuse of dominance case is expected Wednesday (15, February).<\/p>\n

The Competition Commission asked the Competition Tribunal that Telkom be fined 10% of its earnings, or R3.5 billion, for abusing its dominant position in the telecoms market by charging excessive prices.<\/p>\n

Irnest Kaplan, founder and MD of Kaplan Equity Analysts told BusinessTech: \u201cTo get dealt a fine of this size would be materially bad, but it won\u2019t be the end of the group. It won\u2019t close down tomorrow, but it would affect them really badly.\u201d<\/p>\n

Kaplan said If KT corp was interested in Telkom, it was likely to have taken a long-term view of the Telkom\u2019s potential.<\/p>\n

\u201cIf KT has taken a long term view of Tekom, I can\u2019t see it (a R3.5 billion fine) changing their view. It might change certain mechanics of the deal structure over the short-term, but not the long-term strategies.\u201d<\/p>\n

Graeme Teeling-Smith, a telecoms analyst at STANLIB said: \u201cThis is not a new issue facing Telkom and the maximum quantum of the potential fine has been known in the market for some time. I would be surprised if the ultimate fine is as high as R3.5 billion but an amount significantly lower than this is probably a reality.<\/p>\n

\u201cAny clarity around the quantum of any fine is probably a positive for finalising a deal with KT corp as it removes a level of uncertainty for a new shareholder buying into the company.<\/p>\n

\u201cWhat is obviously of concern would be the level of pricing of any deal with KT corp. The original announcement in 2011 referred to a transaction being done at a price of R36 per Telkom share, with the current price at below R28 per share that level of pricing for the KT corp transaction looks increasingly optimistic.\u201d<\/p>\n

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 \u2013 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).<\/p>\n

KT has a market capitalisation of approximately US$10 billion.<\/p>\n

The group is a market leader in the Republic of Korea\u2019s 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).<\/p>\n

At close of play on the JSE on Tuesday, shares in Telkom slipped 69 cents or 2.45% to R27.51.<\/p>\n","protected":false},"excerpt":{"rendered":"

A potential R3.5 billion fine facing Telkom (TKG) for abusing its market dominance would not impact on the long-term structuring of a potential deal with KT Corporation, according to analysts.<\/p>\n","protected":false},"author":9,"featured_media":4810,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[1516,1520,1527,26,1529,175,1528,98,1482,65],"class_list":["post-6059","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-telecommunications","tag-competition-commission","tag-competition-tribunal","tag-graeme-teeling-smith","tag-headline","tag-irnest-kaplan","tag-jse","tag-kaplan-equity-analysts","tag-kt-corporation","tag-stanlib","tag-telkom"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/6059","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=6059"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/6059\/revisions"}],"predecessor-version":[{"id":6073,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/6059\/revisions\/6073"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/4810"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=6059"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=6059"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=6059"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}