Telkom and KT Corp are inching closer to a deal. The SA fixed-line operator told shareholders on Friday that a diagnostic review has now been “substantially completed” that could result in the Korean company buying a significant minority stake in the company.

Telkom first announced the talks between the companies in October 2011 by way of a cautionary notice to shareholders, and has updated the cautionary several times since then as required by JSE regulations. The two companies are looking into “areas of mutual strategic and business cooperation”.

“The companies are cooperating to harmonise their respective findings and agree the terms of the potential strategic venture,” Telkom said on Friday.

“Discussions continue to be positive and collaborative, with both companies seeking to conclude a mutually beneficial transaction as soon as possible.”

The SA company said the proposed transaction will be presented to the boards of both Telkom and KT Corp for approval before finalising the transaction agreements, engaging with key stakeholders and presenting the terms of the proposed venture to Telkom shareholders for approval.

“Shareholders are once again advised that although discussions regarding the potential strategic venture are ongoing, there is still no certainty that a formal transaction will be proposed or concluded.”

In recent weeks, analysts have expressed concern that KT Corp might seek to renegotiate the terms of any deal because of a sharp decline in Telkom’s share price since the talks were first announced.

In its original cautionary related to the discussions, Telkom said it was looking at issuing new Telkom ordinary shares for cash at an issue price of R36,06 so that KT Corp could take a 20% equity position. However, on Friday morning, the share price was trading at R26,24. In recent weeks, it has traded as low as R24,80. — Duncan McLeod, TechCentral