Telkom’s plan to sell a stake in its business to KT Corp (formerly Korea Telecom) and to form a strategic venture with the Korean company appears to be progressing well.
The JSE-listed fixed-line operator said on Monday the two companies had signed a memorandum of understanding under which they’ll share information on an exclusive basis for a period of time. This will allow them to determine the areas of “mutual strategic and business cooperation” and ascertain the benefits of a tie-up.
Telkom told shareholders in October that it was in discussions with KT Corp about a “potential strategic venture” that, if implemented, would result in the Korean company buying a “strategic equity shareholding” of 20% (excluding shares reserved for employee share schemes).
Analysts have generally welcomed the development, saying that on balance it would be positive for the incumbent fixed-line operator in a market that has become much more competitive. KT Corp has already faced many of the challenges confronting Telkom.
Telkom says a “diagnostic review” will begin immediately and the company will update shareholders again in six weeks.
“The potential strategic venture will only be proposed to all Telkom shareholders on fulfilment of certain preconditions,” Telkom says. Government remains Telkom’s single biggest shareholder, with a 40% direct stake.
The preconditions that have to be met include the conclusion of transaction agreements to the satisfaction of both parties, endorsement by Telkom’s big shareholders and consultation with the SA Reserve Bank.
In a move clearly designed to placate government and trade unions, Telkom says the proposed venture, if implemented, will not result in a change to Telkom’s corporate strategy or in any loss of jobs at the company. The Cosatu-aligned Communication Workers Union has already voiced concern about the proposed deal.
Telkom cautions there is no certainty that a formal transaction will be concluded. — Staff reporter, TechCentral
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