Korea’s KT Corp has made a formal offer to purchase 20% of Telkom. However, it’s offering a significantly reduced price for the stake because of a sharp fall in the value of the shares of the JSE-listed telecommunications group since talks began in October last year.

KT Corp is offering R25,60/share, down by nearly a third from the R36,06/share that had been proposed when Telkom first announced the discussions by way of a statement to shareholders on 14 October 2011. Telkom’s share price has fallen by 22,7% in the past six months and by 37,4% from a year ago.

It’s also attached a new pre-condition to its proposed investment: the right to walk away from the deal if it doesn’t like the outcome of probes by the competition authorities into Telkom’s past practices.

“Since the first cautionary announcement … there have been a number of developments concerning Telkom that have materially impacted the Telkom share price,” the company said on Tuesday. “As a consequence, Telkom and KT have agreed to revisit the terms of the potential equity investment.”

The transaction, if it is approved, will occur through the issuing of new Telkom ordinary shares. Both parties have agreed to the revised cash issue price. The proposed issue price represents a premium of 9,9% over the closing price of Telkom shares on 4 May, the company said. It is also a 7,1% premium to the volume-weighted average price in the 30 trading days up to 4 May.

In addition, if any dividends are declared and/or paid to Telkom shareholders prior to the implementation of the venture, the aggregate subscription price payable by KT will be reduced by 20% of the total dividend amount.

In terms of the proposed deal, KT and Telkom will enter into a five-year “co-source management services” agreement and identify areas of strategic co-operation.

Conclusion of the deal remains subject to a number of pre-conditions, including final resolution of the investigation by the competition authorities into alleged anticompetitive practices by Telkom “to the satisfaction of KT” and the receipt of in-principle support from the SA government, Allan Gray and the Public Investment Corp.

Only then will it be presented to all Telkom shareholders for approval.